J.B. Hunt Transport Services Inc. kicked off the fourth quarter 2017 and full-year earnings season in the trucking industry reporting big gains in profits for both periods, due in large part to the recent tax law changes approved by Congress late last year – despite drags on fourth-quarter operating income from increased driver and insurance costs.
Fourth quarter 2017 net earnings at the Arkansas-based trucking, intermodal and logistics services provider totaled $385.3 million, or $3.48 per share, compared to net earnings of $117.6 million a year earlier, or $1.05 per share.
The results include a $309.2 million decrease in income taxes from what J.B. Hunt said was its “reasonable estimate of the change in future tax rates on deferred tax balances at Dec. 31, 2017, as a result of the Tax Cuts and Jobs Act enacted in the quarter.”
Total operating revenue for the quarter was $1.99 billion, compared with $1.72 billion for the fourth quarter 2016, a 16% increase.
Operating income for the fourth quarter of 2017 dropped 25% from a year earlier to $145.8 million from $194.4 million.
For all of 2017, J.B. Hunt reported net earnings of $686.3 million, or $6.18 per share, compared to $432.1 million in 2016, or $3.81 per share.
Total operating revenue for 2017 improved 10% from the year before to $7.2 billion, but operating income slid 13% to $624 million.
Fourth Quarter Revenue up in All Segments
The company’s intermodal segment saw revenue increase 10% in the fourth quarter from a year earlier to $1.1 billion, but operating income fell 25% to $93.3 million. The segment’s total volume grew 5% over the same period in 2016.
“Benefits from increased volume and revenue per load were offset by increased costs to attract and retain drivers, higher third-party dray costs, increased insurance and claims costs, and inefficiencies in the rail networks due to congestion and track and yard maintenance,” the company said.
The quarter ended with approximately 89,000 units of trailing capacity and approximately 5,500 power units in the dray fleet.
J.B. Hunt’s dedicated operation reported revenue rose 20% to $477 million as operating income declined 39% to $34.9 million.
The company said the increase in revenue and improved asset utilization was offset with higher driver wages, "including the timing between wage increases and recovery through customer contracts, higher driver recruiting costs including the length of time to fill open positions, increased insurance and claims costs, [and] higher equipment ownership costs.”
The company’s third-party logistics and brokerage operation reported revenue increased 40% to $323 million as operating income improved 86% to $11.3 million.
“Gross profit margin increased to 14.1% in the current period from 12.9% last year, primarily from the increased spot market activity, which more than offset the margin compression realized in the contractual volumes,” J.B. Hunt said.
The company’s truck operation, by far its smallest segment in terms of revenue, said revenue increased 1% to $97 million while operating income declined 5% to $6.4 million.
“Favorable changes from higher revenue per load were offset by higher driver wages and independent contractor costs per mile, lower tractor utilization from an increase in unseated trucks, and higher insurance and claims costs compared to fourth quarter 2016,” J.B. Hunt said.
At the end of the quarter the truck segment operated 2,032 tractors compared to 2,128 a year ago.