J.B. Hunt Transport Services (CCJ Top 250, No. 5) is turning its attention to the 2027 bid season to secure rate increases, emphasizing that pricing must catch up with a widening value proposition and rising operational costs.
J.B. Hunt posted a 1% gain in third-quarter net earnings as 20% revenue growth was largely absorbed by higher driver, fuel, and medical costs.
During the company’s third-quarter earnings call, leadership pointed to a large gap between highway and intermodal pricing, which sits at more than double historical norms, as well as ongoing inflationary pressures in driver pay, insurance, and medical claims.
"After four challenging years during the freight recession and continued inflationary cost pressures across the business," said Darren Field, president of Intermodal, "our focus during the 2027 bid season is on repairing our margins to earn an appropriate return on our investments to support our future growth."
J.B. Hunt successfully deployed aggressive pricing strategies earlier in the year within its brokerage (ICS) and truckload (JBT) segments to address profitability woes. Now, leadership plans to apply that same discipline to intermodal and dedicated contracts as agreements come up for renewal.
Field said the 2026 bid season delivered low single-digit price increases. With the 2027 Intermodal bid season beginning, he noted that the operating environment is drastically different from a year ago, mainly due to increased inflationary cost pressures primarily related to driver availability that has increased the size of the rate hikes needed.
The transportation company during the most recent quarter posted net earnings of $172.4 million, or $1.82 per diluted share, compared with $170.8 million, or $1.76, during the same period last year. Total operating revenue climbed to $3.68 billion from $3.05 billion. Excluding fuel surcharges, revenue rose 13%.
Operating income increased 2% year over year from $242.7 million to $247.1 million but was down 5% from the second quarter. The operating ratio worsened to 93.3% from 92.1%.
Three major cost buckets cut operating income by more than $50 million compared with the second quarter, Chief Financial Officer Brad Delco said on the company’s earnings call. These are driver-related investments, volatile fuel prices and higher claims and medical costs. Group medical alone accounted for over $16 million of the increase.
Slightly more than half of the $50 million came from driver-related costs including recruiting, onboarding, training, sign-on bonuses and targeted wage actions, Delco said, adding that the costs “will without a doubt need to get recouped with pricing.”
Trucking companies have raised driver pay amid tightening capacity and increased regulatory enforcement.
J.B. Hunt’s recruitment investment seems to have paid off: its driver count rose 3.5% year over year in the third quarter even as salaried office headcount fell about 4.5%, Delco said. He added that the numbers show the company is putting its investments “where demand is requiring us to make the investments.”
Management described the pressures as cyclical rather than structural. “We have not given back the structural cost improvements from our lowering our cost to serve initiative,” Delco said.
Intermodal demand outpaces capacity, dedicated absorbs cost
Intermodal loads rose 8% year over year to 585,582, and revenue per load increased 11% to $3,121. Transcontinental volume rose 1%, while Eastern network volume jumped 18%.
Field said demand outpaced the company’s capacity. “I don’t remember a time when our own drayage capacity became a little bit of a bottleneck for us. … That’s not something we’re used to and thus we highlighted cost challenges as a result of that.”
Driver hiring improved as the quarter went on, Field said, but the company at times slowed load booking to “make sure we were able to honor our commitments.”
In Dedicated Contract Services, operating income fell to $81.7 million from $104.3 million a year earlier. DCS revenues jumped 11% year over year to $960 million. Revenue per truck per week rose to $5,732 from $5,209, and the fleet ended the quarter at 12,864 trucks.
The segment saw solid demand, but results were “below our expectations,” said Brad Hicks, president of Dedicated Contract Services, as it was impacted by inflationary cost pressure and “absorbing startup costs associated with onboarding new business.”
Repricing pays off in brokerage and truckload, but final mile falls behind
The Integrated Capacity Solutions brokerage segment delivered the biggest swing, reporting a 22% year over year volume increase and a 29% jump in revenue per load due to increases in contractual and transactional rates. Gross profit margin was 14.3%, compared with 15.0% a year ago.
Truckload loads increased 4%, and revenue per load rose to 29%. COO Nick Hobbs said the company took a calculated risk on rates, lost some volume, and then won much of it back.
“We took an appropriate amount of risk in these discussions and while we did see some volume churn from customers, we remain disciplined on rate and quickly addressed our profitability woes in the second quarter,” he said.
Final Mile Services was the weak spot. Stops fell 10% to 876,409, and the company is working to offset a previously disclosed $90 million revenue headwind. Hobbs said the business expects a “modest peak season.”
Capital allocation and balance sheet
Net capital expenditures were $291.1 million for the first nine months, compared with $490.9 million a year earlier. Management still expects about $700 million for the full year.
J.B. Hunt repurchased about 704,000 shares for roughly $174 million in the third quarter, leaving about $619 under its authorization. Debt fell to about $1.12 billion from $1.60 billion a year earlier.
CEO Shelly Simpson said margin repair is the company’s top priority heading into 2027. “Our priority from now moving into next year is repairing our margins to create long term shareholder returns,” she said.
