J.B. Hunt Transport Services (NASDAQ:JBHT) reported third-quarter revenue growth and modest gains in operating income and earnings per share as strong demand across its transportation services was partly offset by higher driver-related, fuel, claims and medical costs.
On a GAAP basis, total revenue rose 20% from the prior-year period, operating income increased 2%, and diluted earnings per share rose 3%, Chief Financial Officer Brad Delco said. Sequentially, operating income declined 5% from the second quarter, though Delco said the result was at the better end of the company’s intra-quarter guidance range.
Management emphasized that its focus is shifting toward restoring margins through pricing, particularly as customer demand and capacity constraints have raised the value of reliable transportation services.
Cost pressures weigh on quarterly profitability
Delco said driver investments, volatile fuel prices and higher claims and medical expenses reduced operating income by more than $50 million compared with the second quarter. Group medical costs alone accounted for more than $16 million of the increase.
Driver-related spending included recruiting, onboarding, training, sign-on bonuses and targeted wage increases. Delco said slightly more than half of the $50 million impact was tied to onboarding, training and other costs associated with attracting drivers. He added that these costs will need to be recovered through pricing.
“We absorbed near-term cost pressure while investing behind growth,” Delco said, adding that the company has not reversed structural savings from its Lowering Our Cost to Serve initiative.
President and CEO Shelley Simpson said the company is seeing improved driver hiring results and continued safety gains. Its year-to-date safety performance, measured by Department of Transportation preventable accidents per million miles, remained ahead of the company’s record performance last year, according to Chief Operating Officer Nick Hobbs.
Delco also said salary and office personnel headcount declined about 4.5% year over year during the third quarter, while driver count rose 3.5%, reflecting investments in areas where demand requires additional capacity.
Pricing becomes central focus
Management said J.B. Hunt is entering a phase in which contractual transportation rates are being repriced after earlier adjustments in more transactional markets. Executive Vice President of Sales and Marketing Spencer Frazier said the company first repriced its Integrated Capacity Solutions, or ICS, brokerage operations during the second quarter, followed by its J.B. Hunt Truckload, or JBT, portfolio during the third quarter. The company is now actively repricing its Intermodal and Dedicated Contract Services operations.
Simpson said the company’s goal is to return each business unit to its margin targets while continuing disciplined growth. She said customers are increasingly focused on provider quality, resiliency and execution rather than solely on rate per mile.
In Intermodal, President Darren Field said the company typically implements new pricing on about 10% of volume in the fourth quarter and on roughly 30% of volume in each of the first three quarters of the following year. Field said the company is seeking larger increases than in prior pricing cycles to offset inflationary costs and improve margins, but he did not provide a pricing forecast.
Field said the company has begun its 2027 Intermodal bid season, after realizing low-single-digit pricing increases across its overall network during the 2026 bid season. He said customer conversations on pricing have become more realistic as customers face their own capacity and driver challenges.
Intermodal volumes set records, with stronger growth in the East
J.B. Hunt’s Intermodal business posted record quarterly volumes, with total volume up 8% year over year. Monthly volume increased 9% in July, 8% in August and 9% in September.
Eastern network volume grew 18%, while transcontinental volume increased 1%. Field said the company continues to see substantial road-to-rail conversion opportunities in the East, where tight truckload capacity, higher fuel prices and solid Intermodal service have supported demand.
However, Field said demand exceeded available capacity during portions of the quarter, with drayage driver availability becoming a bottleneck. The company at times slowed load bookings to ensure it could meet customer commitments, he said.
Management said the price gap between highway transportation and Intermodal remains significant. Frazier said the spread is more than double a historical norm of about 15%, creating an opportunity for the company to increase Intermodal pricing while retaining a competitive advantage over truckload alternatives.
Field said J.B. Hunt remains selective in pursuing growth, prioritizing freight that can remain in Intermodal over the long term rather than volume that could return to highway transportation if the pricing gap narrows too much.
Dedicated pipeline supports future fleet expansion
Dedicated Contract Services President Brad Hicks said third-quarter results in the segment fell below expectations, as solid demand was outweighed by growth-related costs and inflationary pressure. Still, he said the long-term opportunity and margin outlook for the business had not changed.
The company sold approximately 425 trucks tied to new Dedicated contracts during the quarter, bringing year-to-date new sales to 970 trucks. That figure approaches J.B. Hunt’s full-year target of 1,000 to 1,200 new trucks, while its sales pipeline remains at record levels.
Pricing activity in Dedicated increased nearly 50% in September from the prior year, Hicks said, while the volume of business moving through engineered design requests was near record levels. He said some customers are expanding their existing dedicated fleets because third-party capacity has become less reliable.
New accounts generally take about six months to reach targeted profitability, Hicks said. Startup costs have increased because attracting drivers requires greater recruiting spending, sign-on bonuses and, in some locations, higher wages. The company has revisited the economics of recently launched accounts where driver wage assumptions proved inadequate, he said.
“We are evaluating the entire book of business,” Hicks said, adding that the company expects fleet growth to continue but may face modest near-term margin pressure as new accounts are launched.
Capital allocation remains return-focused
J.B. Hunt reported net capital expenditures of $146 million during the quarter, primarily for replacement needs. Delco said capital expenditures are expected to rise in the fourth quarter because of the Dedicated opportunity pipeline, while the company continues to target approximately $700 million in capital expenditures for the full year.
The company also repurchased about $174 million of stock, representing more than 700,000 shares, during the quarter. Delco said J.B. Hunt intends to invest where returns are compelling, maintain its investment-grade balance sheet, support a growing dividend and remain opportunistic with share repurchases.
Simpson said the company is seeking growth that produces attractive returns rather than growth for its own sake. “Our priority from now moving into next year is repairing our margins to create long-term shareholder returns,” she said.
About J.B. Hunt Transport Services (NASDAQ:JBHT)
J.B. Hunt Transport Services, Inc is a transportation and logistics company headquartered in Lowell, Arkansas. Founded in 1961 by Johnnie Bryan Hunt and Johnelle Hunt, the company has grown from a small trucking operation into a major provider of freight transportation and supply-chain services across North America.
The company’s primary business activities include intermodal transportation, which combines rail and truck services; dedicated contract services, which provides customized fleet and delivery operations for individual customers; and integrated capacity solutions, including freight brokerage and third-party logistics.
