Freight recession nearing end, JB Hunt says expressing customer sentiment

Inventory correction at the heart of the current freight downturn

J.B. Hunt Transportation said Jan. 18 they are hearing from customers that the inventory correction at the heart of the current freight downturn…

The leaders of J.B. Hunt Transportation said Jan. 18 they are hearing from customers that the inventory correction at the heart of the current freight downturn will have come to an end by the middle of this year, setting the stage for a new leg of growth.

Speaking to analysts on a conference call discussing Arkansas-based J.B. Hunt’s fourth-quarter earnings, President Shelley Simpson said today’s freight recession is largely being driven by those inventory issues, which have their roots in the supply-chain problems from early in the COVID pandemic as well as consumers’ changing spending patterns as the economy emerged in earnest from lockdowns and other restrictions.

More broadly, she said, customers aren’t reporting widespread problems with demand. Instead, they are confident that their freight needs will return to more normal levels this spring.

“We’re not sure at what point that is in the second quarter,” Simpson said. “But we do feel like the back half of the year, we have confidence from what our customers are giving us and the data points that they have, what they’re going to be doing from an ordering perspective.”

Clients Expression

Simpson and her fellow executives were careful to note that they were merely passing along what clients are saying. Forecasting a notable upturn in their business during the second half of 2023 was not something they were prepared to do, they said. But the customer optimism they reflected echoes the sentiment expressed earlier this week by Bank of America analyst Ken Hoexter. In upgrading the shares of several trucking companies, Hoexter said he sees demand beginning to grow again and is looking for truckload rates to bottom during the upcoming bid season.

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Forecasting a notable upturn in their business during the second half of 2023 was not something they were prepared to do, they said. But the customer optimism they reflected echoes the sentiment expressed earlier this week by Bank of America analyst Ken Hoexter

Upbeat Investors

Investors in J.B. Hunt were equally upbeat in January, pushing shares of the company up nearly 5% to nearly $185 on a day when the broader market was down about 1%. Over the past six months, the stock has climbed about 10%, growing the company’s market capitalization past $19 billion.

That stock price move came despite J.B. Hunt’s fourth-quarter showing a drop in net income to $201 million from $242 million in late 2021 while operating revenues excluding fuel surcharges slipped 3% to a little more than $3 billion. Higher operating costs, including a jump in insurance claims, pushed down the company’s operating margin to 7.7% from 9.2% a year prior.

Expansion up to $2 Billion in Equipment

J.B. Hunt said it will spend between $1.5 billion and $2 billion on equipment and expansion. Chief executive John Kuhlow said that figure includes “elevated levels of replacement demand” for trucks that have been run longer than normal in recent years as manufacturers have struggled to meet demand.

About JB Hunt

J.B. Hunt Transport Services, Inc., a Fortune 500 and S&P 500 company, provides innovative supply chain solutions for a variety of customers throughout North America. Utilizing an integrated, multimodal approach, the company applies technology driven methods to create the best solution for each customer, adding efficiency, flexibility, and value to their operations. J.B. Hunt services include intermodal, dedicated, refrigerated, truckload, less-than- truckload, flatbed, single source, last mile, and more. J.B. Hunt Transport Services, Inc. stock trades on NASDAQ under the ticker symbol JBHT and is a component of the Dow Jones Transportation Average. J.B. Hunt Transport, Inc. is a wholly owned subsidiary of JBHT.