January 21, 2016 11:00 AM, EST
J.B. Hunt Earnings Rise; Rail Results Decline

Fourth-quarter trucking earnings reports kicked off with J.B. Hunt Transport Services Inc. posting 5.8% higher earnings of $116.7 million, or $1.01 per share, led by improved profits in its dedicated, over-the-road and brokerage businesses.

J.B. Hunt, which ranks No. 3 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, raised revenue less than 1% to $1.62 billion. In the 2014 quarter, net income was $110.3 million, or 93 cents per share, on revenue of $1.61 billion.

Meanwhile in the rail industry, Union Pacific Corp., based in Omaha, Nebraska, said fourth quarter earnings fell 22% to $1.12 billion, or $1.31 per share. Canadian Pacific Railway Ltd. net income fell 30% to C$319 million ($240 million), or C$2.08 per share. Executives at both companies cautioned that economic headwinds hurt results for the quarter.

Hunt’s trucking units improved revenue to $468.3 million from $459.3 million. Trucking profits were helped by private fleet conversions, improved productivity and higher rates. Profit before interest and taxes for dedicated and over-the-road freight was $52.4 million, a 16% increase from $45.1 million.

The statement cited “the addition of new customer accounts and rate increases implemented in the current and earlier periods” for improved dedicated business results. Over-the-road freight results improved due to “customer rate increases and an increase in fleet size.”

About 800 new trucks were added to the dedicated and over-the-road businesses, and their operating ratio improved to below 90.

In the brokerage sector, profit margins rose 2.3 percentage points to 16%, leading to a 40% increase in profits before interest and taxes of $12.8 million. The 4% brokerage revenue decline to $190 million was tied to lower fuel surcharges.

Allison Landry at Credit Suisse cited in a report multiple reasons for higher earnings.

“J.B. Hunt benefited from higher revenue in intermodal, dedicated and [over-the-road] trucking, improved fuel economy, lower maintenance costs on new equipment, less reliance on third parties in intermodal and dedicated, expanding gross margins in the non-asset division, and lower safety and insurance costs in trucking,” she said.

Intermodal, the largest unit of the Lowell, Arkansas-based company, moved 5% more freight on transcontinental routes and 8% more freight in the East, resulting in 6% total truck-rail shipments. Revenue rose 1% to $967 million, held down by fuel surcharges. Before interest and taxes, truck-rail profit fell 1% to $127.7 million, held down by higher rail rates.

The intermodal operating ratio was 86.8.

Union Pacific revenue declined 15% to $5.21 billion as coal revenue fell the most at 31% and revenue slipped.14% for intermodal. Truck-rail freight shipments declined 7%, and total loads dropped 9%.

Canadian Pacific revenue dipped 4% to C$1.69 billion as total shipments fell 6%. Intermodal revenue and shipments both declined 8% at the Calgary, Alberta-based railroad.