Freight-Demand To Regain Traction, Volatility To Reduce According To J.B. Hunt

Thanks to COVID-19, revenues across the logistics and supply chain sectors continued to grow, reflecting growing demand. But by the last quarter of 2023, thanks to inflationary pressures, demand fell exponentially. As a result, revenues too were affected, and certain businesses had to lay off personnel to deal with changing expectations. Now in 2023, trucking and logistics giant J.B. Hunt Transport Services Inc. expects freight demand to regain traction in the coming months as the pandemic-driven upheaval in supply chains fades and companies return to more conventional ordering cycles. 

Slowing shipping demand helped push fourth-quarter profit at J.B. Hunt down 17% from the same quarter the year before, and revenue growth fell short of expectations as retailers pulled back on inventory restocking and consumer spending sagged during the traditional shopping season heading into the holidays. Operating revenues at the freight bellwether rose 4% in the last three months of 2022 over the year before to $3.65 billion, but freight-related revenues excluding fuel surcharges were off about 3% from the fourth quarter of 2021. 

Operating income in the company’s intermodal segment, which moves goods in a combined truck and rail transport, fell 8% to $179 million as declining volumes and higher labor, maintenance, and insurance costs offset an 11% increase in revenue. Demand for intermodal capacity was seasonally weaker than normal, as peak season activity leading up to the holidays was absent this year.

Key Takeaways

While company executives declined to provide earnings guidance for the rest of 2023, they expect an “inventory correction” of sorts, to fade. According to experts, retailers and manufacturers will soon start ordering goods for the summer and fall of 2023. Thanks to COVID-19, the Russia-Ukraine war, and other disruptions, seasonality has been hit hard for supply chain and logistics companies. 

Constantly elevated demand levels have pushed logistics operations to create alternate strategies to meet the gap. But now, in 2023, it seems, seasonality has come back into play. J.B. Hunt meanwhile, is awarding almost $9 million in what it called “appreciation bonuses” to employees after a year in which it totaled $969.4 million net profit, about 27% more than it reported in 2021. Clearly, the company expects freight demand volatility to ease off, and expects some semblance of pre-COVID order again.

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