J.B. Hunt Transport Services told investors this week that third-quarter earnings are likely to fall between 5% and 10% compared with the prior quarter, citing a rapid rise in diesel fuel prices and higher driver-related expenses. Executives shared the update Tuesday evening at a Morgan Stanley investor conference, and shares of the Arkansas-based carrier dropped roughly 12% in trading the following day.
The company said the revised outlook points to third-quarter earnings per share of about $1.77 at the midpoint, well below the roughly $2.10 that analysts had expected. Leadership attributed the shortfall to two main factors: an estimated $25 million in additional driver-related costs, including recruiting and bonuses, and at least $10 million in incremental fuel expenses tied to a steep climb in diesel prices during the quarter.
Diesel costs rose sequentially in eight of the eleven weeks of the third quarter, according to the company, with a roughly 10% jump between July and August alone. Because fuel surcharges are typically applied on a one-week lag, carriers absorb a portion of sudden price increases before surcharge mechanisms catch up.
J.B. Hunt executives described the added cost pressure as more cyclical than structural, framing rising driver pay as a sign of continued strength in freight demand. The company's intermodal and dedicated contract segments, which make up the bulk of its operating income, tend to adjust to rate changes more slowly than over-the-road pricing, delaying the point at which higher costs get passed through to customers. Leadership said overall freight demand across its business lines remains solid heading into the fourth quarter.
Source: FreightWaves - https://www.freightwaves.com/news/j-b-hunt-flags-q3-cost-pressures-shares-sink-12