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February 10, 2020 1:15 PM, EST

Hub Group Posts Decrease in Q4, Full-Year Results

Hub Group

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Hub Group reported a fourth quarter close to expectations that paled in comparison with the record-breaking results in 2018.

The Oak Brook, Ill.-based intermodal and logistics service provider posted net income of $28 million, or 84 cents in diluted earnings per share, during the three months ending Dec. 31. That compared with $48.9 million, or $1.46 a share, during the same time the previous year. Revenue decreased 12% to $901 million from $1.018 billion.

Hub Group credits profit-improvement initiatives and the resiliency of its diversified model for its fourth-quarter results. The company expects such initiatives to provide for long-term earnings growth.

Yeager

“We remain focused on executing our strategy, key tenets of which include delivering a superior experience for both our customers and employees, diversifying our service offerings and investing in technology while increasing profitability and our return on invested capital,” CEO Dave Yeager said in a statement.

The results were close to expectations set by Wall Street analysts, who had been looking for 84 cents per share and quarterly revenue of $940.43 million, according to Zacks Consensus Estimate.

For all of 2019, Hub Group reported net income of $107 million, or $3.22 a share, on revenue of $3.7 billion. That compared with net income of $202 million, or $6.04 a share, on about the same revenue in 2018.

“Last quarter, we announced profit-improvement initiatives focused on operational enhancements, technology-driven automation, revenue management, and procurement savings in transportation and general and administrative costs,” Yeager said. “We continue to execute on these important initiatives that position Hub for success despite the challenging freight environment.”

Hub Group

Despite a 6% decline in logistics revenue in the fourth quarter, gross margin expanded 36%. (Hub Group)

The earnings report detailed that operating income for the year included $8.5 million from pre-tax settlements and consulting costs that were incurred in the third quarter. That related to an alleged misclassification of drivers. When excluding those expenses, operating income would have increased 29% to $161 million.

Breaking down results by division, intermodal revenue decreased 9% to $548 million in the fourth quarter from $598 million in the year-ago period. This primarily was due to an 11% decline in volume, attributed to a soft demand environment and increased truckload and intermodal competition.

The report also states truck brokerage handled 4% fewer loads in the fourth quarter compared with the previous year. This, and other factors, resulted in truck brokerage revenue declining 29% to $100 million in the quarter.

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Fourth-quarter logistics gross margin expanded 36% due to improvement initiatives, revenue management, new service lines, new customers and the addition of a new brokerage business. This increase occurred despite a 6% decline in revenue, to $183 million from $193.8 million in 2018.

KeyBanc Capital Markets Analyst Todd Fowler wrote after the earnings were released that the company had a solid outlook against a tepid backdrop. His report found that guidance was consistent with expectations and thus current year estimates of earnings per share of $3.45 are maintained.

“Our assumptions could prove conservative if freight fundamentals improve sooner or at a greater magnitude than expected,” Fowler wrote in the report. “Overall, we come away from current quarter results incrementally constructive with guidance highlighting benefits from company-specific cost actions, and the potential for meaningfully higher earnings in a stronger underlying freight environment.”

Hub Group ranks No. 12 on the Transport Topics Top 100 list of largest for-hire carriers in North America and No. 30 on the TT Top 50 list of largest logistics companies.

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