Hub Group Reports Strong Third-Quarter Earnings

Transportation Management Company Also Still Expects to Make an Acquistion in 2018
Hub Group truck
Hub Group

On the strength of a strong economy and the sale of one its divisions, Oak Brook, Ill.-based transportation management company Hub Group reported record third-quarter results Oct. 25.

The company’s net income was $114.6 million, or $3.41 a share, compared with $15.3 million, or 46 cents a share in 2017.

In late August, Hub Group finalized the sale of its subsidiary Mode Transportation to York Capital Management for about $238.5 million. Mode Transportation was one of two freight brokerage business units that Hub Group operated.

The company said its third-quarter earnings included an $86.3 million gain on the sale of Mode Transportation, net of transaction costs and income tax.

Hub Group’s quarterly revenue was $933.2 million, compared with $824.8 million in 2017, a 13% increase.

Quarterly operating income increased by 121% to $34.7 million from $15.7 million.

On a conference call with reporters, company officials said they were optimistic about the company’s financial health because of the growth of the economy continuing into 2019.

“We continue to see a strong peak, while experiencing capacity constraints across our network,” CEO David Yeager said. “We believe that this tight capacity environment will continue through the end of the year. The strength of the intermodal market, coupled with cost advantage versus trucks, will contribute to a positive price environment in 2019. We are forecasting mid-to-high single-digit price increases in 2019, along with continued volume growth.”

At the time of the sale of Mode Transportation, Hub Group said proceeds from the sale would be used for investments in existing Hub businesses, including technology initiatives and for acquisitions of businesses in new and existing service lines.

“I would be very disappointed if, in fact, we do not have an acquisition accomplished by the end of this year,” COO Donald Maltby said on the conference call. “What we have been looking at to acquire is something that is very strategic for us, that we will be able to grow. So it’s not just what we are buying today, and the earnings we are buying today, it’s what we can make of it long term, with the management team of the acquired company.”

Hub Group ranks No. 33 on the Transport Topics Top 50 list of largest logistics companies in North America and No. 12 on the TT list of largest firms in the freight brokerage sector.