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January 18, 2020 1:45 PM, EST

J.B. Hunt Reports Net Income Growth of 5.4% for 2019

J.B. HuntJ.B. Hunt Transport Services

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J.B. Hunt Transport Services Inc. on Jan. 17 reported gains in net income and operating revenue for the fourth quarter of 2019 and for the full year.

The Lowell, Ark.-based transportation and logistics company said Q4 net income rose to $144.7 million, or $1.35 per diluted share, compared with $88.7 million, or 81 cents, during the same period the previous year. Operating revenue rose 6% to $2.45 billion, compared with $2.32 billion a year earlier, while Q4 operating income rose 67% to $205.1 million, compared with $122.7 million a year earlier.

Operating income for the quarter included $134 million in charges for contingent liabilities related to arbitration with BNSF Railway Company. Excluding these charges, operating income decreased 20% compared with Q4 2018.

For the year, net income rose 5.4% to $516.3 million, or $4.75 per share, from $489.6 million, or $4.43, a year ago. Operating revenue rose 6% to $9.17 billion from $8.61 billion, while full-year operating income increased 7.8% to $733.8 million from $681 million a year ago.

“We continue to experience cost headwinds and utilization challenges, both of which put pressure on near-term marginal improvements,” CEO John Roberts said during a Jan. 17 conference call with investors. “We will watch closely for a balanced approach between growth and great quality.”

“We experienced a very strong but very compressed peak season during the quarter,” added CFO David Mee. “It allowed no room for operational hiccups. In addition we saw customer expectations for operational accuracy at one of the highest levels we have ever experienced.”

Broken down by business segment, the company’s Intermodal unit saw Q4 revenue remain flat at $1.27 billion, while operating income soared 304% to $131.1 million.

Revenue was affected by a 2% increase in volume that was offset by a 1% decrease in revenue per load. Operating income was affected by $134 million in charges the unit recorded for contingent liabilities related to the arbitration. Excluding these charges, operating income decreased by about 21%, or $35.3 million, compared with Q4 2018.

J.B. Hunt said benefits from the higher volumes were offset by higher rail purchase transportation rates, increased box repositioning costs, increased costs to recover from rail service interruptions and increased costs to attract and retain drivers.

The company’s Dedicated Contract Services unit saw Q4 revenue increase 20% to $717 million, while operating income rose 34% to 79.6 million. The company attributed the gains to contributions from an acquisition earlier in the year and the addition of new customer accounts.

The Integrated Capacity Solutions division saw Q4 revenue increase 9% to $377 million, due primarily to a 3% increase in load growth and a favorable change in customer freight mix, J.B. Hunt said. The division’s Q4 operating loss narrowed to $11.8 million, compared with $16.1 million in Q4 2018.

The company’s truck segment saw Q4 revenue fall 20% to $94 million, while operating income dropped 57% to $6.3 million.

“In truck we were down in both revenue and operating income, primarily from a smaller volume of spot activity and general customer rate pressure compared to a year ago,” Mee said. “However, the mixture of company-owned equipment with independent contractor carriers, offered the operating income and returns on capital impacts we have historically experienced during these volume and rate declines when we were operating with a 100% owned fleet.”

Freight transactions in the J.B. Hunt 360 marketplace jumped 66% to $289 million during the quarter compared with $174 million in Q4 2018. This marketplace allows shippers to quote, book and ship freight online and also helps carriers can find loads.

“Our operating income declined as we continue to disproportionately invest in the disruptive technology of marketplace 360,” Mee said on the call. “We will continue to do so, most likely for the next four to six quarters, as we complete and improve our digital platforms to generate revenue growth and operating income longer term.”

“During our last call my comments were focused on the key steps taken over the last several years that have charted our course,” Roberts added. “We highlighted our two key growth initiatives — our tech platforms known comprehensively as J.B. Hunt 360, and our final-mile services. We also confirmed our commitment for intermodal dedicated and highway services as part of our long-term strategy.”

J.B. Hunt Transport Services Inc. ranks No. 4 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. It also ranks No. 4 on the TT list of the 50 largest logistics companies in North America.

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