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J.B. Hunt Reports Strong Earnings Amid Early Holiday Shipping Rush, but Excess Capacity and Pricing Woes Leave Freight Market Unsteady

After an initial peek of stability, the holiday season is still proving problematic for freight. While intermodal shipments and imports did swell, the market still faces ample truck capacity and weak pricing are the two key issues now obscuring what is traditionally a peak season for logistics.

J.B. Hunt Transport Services Inc. reported better-than-expected earnings on October 15, raising initial optimism that the freight sector might be stabilizing. However, upon closer inspection, it appears the increase in shipments - especially in intermodal freight -is being pushed by retailers getting holiday merchandise in early, fearful of possible transportation disruptions rather than reflective of broader market growth.

For the last four years, the freight industry has been on a roller-coaster ride. After witnessing almost, the briefest drop-in activity due to the pandemic, the industry witnessed an overwhelming demand that clogged the system. The scenario worsened with a freight recession where shippers had to do all they could to mitigate risks from global supply chain threats, such as Houthi attacks on the maritime routes and the brief East Coast port strike.

J.B. Hunt shares initially soared more than 8% on the news of the company's earnings report but pared that gain to end up 3% after a cautious investor response following the company's conference call. Although J.B. Hunt's freight brokerage business marked a 3% revenue per load increase and intermodal shipments rose by 5%, management said that they are facing persistent headwinds in excess capacity and soft pricing.

Responding to the current Freight scenario, Darren Field, president of intermodal at J.B. Hunt said, “We continue to see truckload pricing that we believe is unsustainable over the long term.”

As renewal of contracts approaches trucking companies such as J.B. Hunt are keeping their fingers crossed for higher priced payloads to improve margins. However, goods movement has been early and mixed feelings about the peak season demand, making it difficult for everyone to predict. As a matter of fact, the team of J.B. Hunt even admitted that they do not know how much of the holiday demand has already been pulled forward.

“We had customers talking about a pull forward just from a preparedness and an overall capacity standpoint,” said Field. “In terms of how much was pulled forward, we don’t really know.”

Ports saw a surge in containerized imports this summer, with jumps as high as 21% in July. Intermodal freight was booming, too; Union Pacific reported an 18% increase in carloads and BNSF Railway intermodal traffic rose 17%. Yet, with manufacturing still sluggish and economic data mixed, the sustainability of these increases remains in question.