J.B. Hunt Shares Fall After Third-Quarter Earnings Warning

Earnings expectations reset

J.B. Hunt shares closed at $236.73 on September 16, down $36.32, or 13.3%, after CFO Brad Delco said third-quarter earnings were likely to decline 5% to 10% from the second quarter. The stock traded about 4.81 million shares, roughly 9.5 times the prior session’s volume, and was the S&P 500’s largest percentage decliner while the index fell 0.4%, according to StockAnalysis.

Delco gave the update September 15 at Morgan Stanley’s 14th Annual Laguna Conference in Dana Point, California. Management said J.B. Hunt historically provides limited intra-quarter commentary and described the forecast as an unusual disclosure, according to the conference transcript.

Second-quarter diluted EPS was $1.91. Applying management’s forecast implies third-quarter EPS of roughly $1.72 to $1.81, with a midpoint near $1.77. FreightWaves reported that the midpoint was about 16% below the then-current $2.10 consensus. BofA said the range was about 19% below its prior $2.19 estimate and cut its third-quarter, 2026 and 2027 EPS estimates by 18%, 9% and 6%, respectively.

Costs rose ahead of pricing recovery

Delco estimated that recruiting, advertising, onboarding, training and sign-on bonuses would add about $25 million of cost in the third quarter compared with the second. He also estimated at least a $10 million sequential fuel headwind and identified higher claims and medical costs without quantifying them. These items provide the reported basis for the lower earnings outlook.

Purchased-transportation costs also increased as capacity tightened. Delco said purchased-transportation spot rates rose about 30% intra-quarter during the second quarter. J.B. Hunt’s second-quarter filing reported $1.68 billion in rents and purchased transportation, equal to 48.0% of revenue and up 32.4% from a year earlier. Fuel expense rose 53.0% to $235.2 million.

The Energy Information Administration reported a national average on-highway diesel price of $6.285 per gallon on September 14, up 31.8 cents in one week and $2.546 from a year earlier. Management described diesel prices as record highs. Fuel-surcharge programs generally recover fuel expense, management said, though about a one-week delay can create an earnings headwind after abrupt price increases.

Volume growth does not resolve the margin pressure

The warning concerns near-term margin conversion rather than an announced revenue contraction. J.B. Hunt reported second-quarter revenue of $3.50 billion, up 19% year over year, operating income of $259.5 million, up 32%, and net earnings of $181.0 million. Management continued to expect volume improvement and described very strong intermodal demand and capacity constraints.

Intermodal produced $1.75 billion, about half of second-quarter revenue, and Dedicated produced $921 million, about 26%. Delco said these businesses generally account for about 90% of company earnings and reprice more slowly than truckload markets. The supported implication is that higher labor, outsourced-capacity and fuel costs can affect earnings before contract pricing adjusts.

Management characterized the cost pressures as more cyclical than structural, though their duration and reversibility remain unproven. Management’s interpretation of driver spending as growth preparation does not change the verified expectation that the spending will reduce third-quarter earnings. The disclosure also does not establish that the goods economy is contracting; Darren Field described peak-season customer forecasts as normal rather than exceptionally strong.

Next measures of recovery

Management said the 2027 intermodal bid season begins around October 1. That process is the first identified opportunity to assess whether J.B. Hunt can recover higher labor, drayage and purchased-transportation costs through pricing. The extent and timing of any recovery remain uncertain.

Actual third-quarter EPS, revenue, operating margin and segment results will remain unknown until the expected October 15 release date. Management did not provide a complete earnings bridge, leaving the size of claims, medical and other cost pressures unspecified. Fuel-surcharge catch-up also depends on whether diesel prices stabilize or remain volatile.

MacroShed Markets is informational analysis, not investment advice.