Hub Group, a company specializing in intermodal transportation and logistics management, encountered hurdles in the third quarter due to lower demand and an oversupply of truckload capacity in the market. Despite these challenges, the company shared its financial results following the close of the market on Thursday.
President and CEO Phil Yeager expressed that they had anticipated a tough third quarter, and that’s exactly what unfolded. The peak season showed signs of weakness, and they do not foresee a significant uptick in demand in the fourth quarter. In fact, demand remained lackluster in July and August, leading to volume declines in their intermodal operations.
During the third quarter, Hub Group reported a net income of $30 million, with earnings per share at 97 cents. This marks a 63% year-over-year decline compared to the same period in 2022, falling short of analysts’ estimated earnings per share of $1.17.
Quarterly revenue came in at $1.02 billion, below analysts’ expectations of $1.17 billion. The third-quarter revenue decreased by 24% year over year compared to the previous year when Hub Group reported $1.35 billion in revenue.
For the full year 2023, Hub Group anticipates adjusted earnings per share in the range of $5.30 to $5.40, with top-line revenue reaching $4.2 billion. The company also expects to invest between $140 million and $150 million in containers, tractors, warehousing equipment, and technology.
Yeager highlighted the benefits of diversifying and expanding their services into less cyclical and non-asset-based segments, with the logistics sector contributing nearly 70% of their operating income in the quarter.
Hub Group faced intense competition in pricing from over-the-road truckload carriers and other intermodal operators during the quarter. Pricing proved to be more competitive than expected. Yeager acknowledged that they might have been slow in adjusting pricing in the early part of the bid season last year, causing them to lose some customers to over-the-road carriers. Nevertheless, they now see an opportunity to win some of those customers back, given the current market conditions.
In terms of their intermodal and transportation solutions, third-quarter revenue stood at $595 million, reflecting a 30% year-over-year decline. Intermodal volumes in the same period dropped by 16% compared to 2022.
The third-quarter revenue for the logistics segment was $460 million, down from $525 million the previous year. The decline in revenue can be attributed to lower revenue per load in their brokerage service line.
Despite the challenges, Hub Group anticipates intermodal volume growth in 2024 due to higher diesel fuel costs and a reduction in truckload capacity in the market. Yeager expressed optimism about seeing some form of a peak season and improved capacity in the market. With inventories coming back in line and fuel prices on the rise, the shift from over-the-road to intermodal is becoming more attractive. The only uncertainty lies in the timing of the demand recovery.