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DATE
Tuesday, July 15, 2025 at 5 p.m. ET
CALL PARTICIPANTS
President — Shelley Simpson
Executive Vice President and Chief Financial Officer — John Kulow
Executive Vice President of People and Chief Commercial Officer — Spencer Frazier
Executive Vice President and President of Highway Services — Nick Hobbs
Executive Vice President and President of Intermodal — Darren Field
Executive Vice President of Finance and Investor Relations — Brad Delco
Executive Vice President and President of Dedicated Contract Services — Brad Hicks
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RISKS
John Kulow stated, “Inflationary pressures—primarily in wages, insurance (both casualty and medical), and equipment costs—more than offset those efforts and weighed on margins compared to the prior-year period.”
Final Mile segment continues to see “muted” demand for big and bulky products, with Nick Hobbs noting, “we believe recent market conditions will persist through at least year-end, driving our second-half performance to look similar to our first-half performance”
Darren Field said, “we didn’t get the pricing that we would have liked to have achieved given cost pressures that every entity is facing.”
Brad Hicks clarified, “the timing and magnitude of our net adds could impact our prior expectations for modest growth in operating income this year compared to 2024.”
TAKEAWAYS
Revenue: GAAP revenue was flat compared to the prior-year quarter.
Operating Income: Decreased 4% year over year on a consolidated GAAP basis due to increased inflationary cost pressures.
Diluted EPS: Declined less than 1% on a consolidated GAAP basis, aided by a 5% lower average diluted share count.
Free Cash Flow: Generated over $225 million of free cash flow.
Cost Initiatives: $100 million in annual cost reductions identified across efficiency, asset utilization, and engineered process improvements, with most benefits impacting 2026 and beyond.
Net Capital Expenditures: Net capital expenditures are expected to be $550 million–$650 million in 2025, narrowed from the previous $500 million–$700 million estimate due to prefunded capacity needs.
Stock Repurchase: Repurchased $319 million of stock, a company record for a single quarter.
Tax Rate Expectation: Forecast for the expected tax rate remains at 24%–25%, likely at the higher end.
Intermodal Volumes: Up 6% year over year—April up 11%, May up 3%, and June up 4%.
Intermodal Mix: TransCon volumes down 1%; Eastern volumes up 15%.
Dedicated Segment Sales: Sold approximately 275 trucks in new deals, with a net sales target of 800–1,000 trucks annually.
ICS Operating Income: Operating expenses down more than $3 million year over year.
Customer Retention Rates: Reported as near record levels, with the ICS segment specifically called out.
Growth in ICS Small/Mid-Sized Business: Small to mid-sized customer growth up 25% year over year.
Peak Season Surcharges: Programs started earlier due to customer volatility and uncertainty in forecasting demand.
Balance Sheet: Maintains leverage near one times trailing EBITDA, supporting ongoing capital allocation and stability.
Quantum Intermodal Service: Launched in Mexico, aligning with the fastest-growing channel at J.B. Hunt Transport Services, Inc.
SUMMARY
J.B. Hunt Transport Services, Inc. (JBHT -2.19%) reported flat revenue, decreased operating income, and marginally lower diluted EPS on a consolidated GAAP basis amidst inflationary pressures, while generating over $225 million of free cash flow and executing a record $319 million stock repurchase. The company clearly signaled that most benefits from its $100 million cost-reduction program will materialize in 2026 and beyond, with segment-level benefits weighted by spend. Intermodal volumes increased 6% year over year, driven primarily by 15% growth in the Eastern network while TransCon declined 1%, signaling meaningful mix shifts with implications for network balance and margin. Dedicated segment fleet losses are largely behind, positioning the business for net fleet growth in the second half of 2025, though startup costs will affect the timing of operating income growth. Customer volatility and forecasting uncertainty are driving earlier peak surcharge implementation across services, as management emphasizes readiness to adapt to shifting demand.
Brad Delco explained, “Our revenue per load, or yield, fell both sequentially and year over year.” but demonstrated 30 basis points of sequential margin improvement in intermodal with relatively similar volumes versus the first quarter, highlighting the impact of cost and productivity initiatives distinct from pricing.
Management emphasized that margin repair will require equal contributions from growth, cost efficiencies, and pricing, not just rate improvement.
Positive headhaul pricing in the intermodal bid cycle was partially offset by backhaul pressure; management described core pricing as “modestly higher” year over year.
Customer retention and satisfaction, measured by awards and survey results, are at some of the highest levels in the last five years and form the basis for multi-segment growth opportunities.
INDUSTRY GLOSSARY
TransCon: J.B. Hunt Transport Services, Inc. term referring to transcontinental intermodal freight traffic, typically spanning the U.S. West Coast to East Coast.
Backhaul: Return trip of a transport vehicle, often with lower rates compared to headhaul; relevant to intermodal pricing and network balance.
Headhaul: Primary, demand-driven direction in a transport lane, usually commanding higher pricing than the backhaul direction.
Bid Season: The period when transportation providers negotiate contract rates and volumes with shippers for the upcoming year.
Drayage: Short-haul transport activity, especially for moving containers between ports/rail yards and distribution centers, crucial to intermodal operations.
Quantum: Branded service offering from J.B. Hunt Transport Services, Inc., recently expanded into Mexico, targeting time-sensitive and service-sensitive intermodal freight.
Full Conference Call Transcript
Shelley Simpson: Thank you, Brad, and good afternoon. Members of the leadership team are here to dive into their areas, but I want to start by recognizing the entire organization for their hard work and ability to adapt to this dynamic market. I remain highly confident that our work is building a stronger company, capable of capitalizing on meaningful growth opportunities ahead. We set out to accomplish this by staying true to our values, mission, and vision and maintaining our focus on operational excellence, scaling into our investments in our people, technology, and capacity, and continuing to repair our margins and drive stronger financial performance, which remains a top priority.
Service levels across our businesses are excellent, and customers have recognized us in both internal and external surveys. Our brand is strong in the market. Our excellent service is supporting our growth with both new and existing customers, which will help us scale into our investments. Investments in our people have resulted in back-to-back years of record safety performance for the company and some of the lowest turnover metrics on record for our drivers. We have invested in technology to drive efficiencies in our business, and I have challenged the organization to think differently about our workflows and processes to drive even more.
Finally, we have prefunded our trailing capacity needs in intermodal and are prepared to support our customers’ future growth. These investments set us up well for our future. While we are preparing for future growth, we remain focused in the near term on repairing our margins and improving our financial performance. We expect the returns on our investments to match the strong and unique value we create for our customers. As you’ve heard me say, we remain focused on controlling what we can with our expenses in the near term, without sacrificing our long-term opportunity. Or said differently, preserving our future earnings power potential. Last quarter, we mentioned more work in the area of cost actions.
Across the company, we launched an initiative to lower our cost to serve. John Kulow will have more details on this work, but at a high level, this effort is centered around doing more with less, to support our future growth and get us back to our long-term margin targets. I have confidence in this team to lower our cost to serve and to leverage our brand and our scroll of services in the market. We completed Intermodal bid season with positive pricing for the first time in two years and continue to gain market share with capacity to grow more.
Our dedicated business remains resilient, and with the fleet losses subsiding, we’re excited to return to fleet growth in this business. We have a solid model in JBT and FMS with significant growth opportunities we are going after. Our brokerage business still has work to do, but progress is being made to further right-size the cost structure while growing with the right customers and freight. Market dynamics remain uncertain, but we will stay disciplined in our actions and maintain a position of strength. We have exceptional service levels, a rock-solid balance sheet with minimal leverage, and available capacity at the ready for future growth.
We will continue to focus on the long term while taking steps in the near term to improve the return profiles of our business, all with the same mission, to drive long-term value for our people, customers, and shareholders. With that, I’d like to turn the call over to our CFO, John Kulow.
John Kulow: Thank you, Shelley, and good afternoon, everyone. I will review the second quarter, provide some details on the lowering our cost to serve initiative, and give an update on our capital allocation. As a general overview and consistent with recent quarters, our results for the quarter highlight the strength and resiliency of our business in the face of a challenging and unpredictable environment, generating over $225 million of free cash flow in the quarter. While we continue to focus on operational excellence, driving productivity, and managing our costs, inflationary pressures, primarily in wages, insurance, both casualty and medical, and equipment costs more than offset those efforts and weighed on margins versus the prior year period.
Starting with second quarter results, on a consolidated GAAP basis, revenue was flat, operating income decreased 4%, and diluted earnings per share was less than 1% below the prior year quarter. The declines were primarily driven by inflationary cost pressures across the business, notably in casualty and group medical claims expense, and higher professional driver wages and equipment-related costs. These were partially offset by productivity and cost initiatives and a 5% lower average diluted share count versus the prior year period. While the recent tax bill remains under review, we continue to expect our tax rate to be between 24-25% and likely towards the higher end of that range.
Regarding costs, we have been managing costs aggressively since the freight downturn began over three years ago. We’ve managed headcounts through attrition and performance management, driven productivity in our operations, and eliminated discretionary spending that ultimately wouldn’t jeopardize our future earnings power nor our ability to capitalize on growth opportunities. Earlier this year, we challenged ourselves to do more, in an effort to accelerate improvement in our financial performance, create greater operating leverage for the company when market dynamics turn, and help support our future growth. Each executive focused on one or two of a total of 14 different areas across the business to identify opportunities to lower our cost to serve.
The results of this initiative resulted in $100 million of identified annual cost to eliminate. These costs fall across three main areas: efficiency and productivity, asset utilization and technology, and engineered process improvements. And we are not done. We continue to expand on these initiatives and will provide updates on our progress in the quarters to come. While some of these benefits will be realized this year, most will impact 2026 and beyond. I’ll wrap up with a quick update on our capital allocation and priorities. For 2025, we are now expecting net capital expenditures to fall between $550 million and $650 million, effectively tightening the range compared to our prior view of $500 million to $700 million.
As previously discussed, we have prefunded much of our future growth and capacity needs, so our capital spend this year is primarily for replacement and what success-based needs we have in our dedicated segment. Our balance sheet remains strong, in line with our targeted leverage of one times trailing EBITDA, and we continue to generate strong cash flow and expect this to continue. The primary use of cash has been managing our leverage, returning value to shareholders through our dividend, and repurchasing stock. We remain focused on deploying capital to generate the highest returns for our shareholders. During the second quarter, we repurchased $319 million of stock, which is a quarterly record for the company.
This concludes my remarks, and I’ll now turn it over to Spencer.
Spencer Frazier: Thank you, John, and good afternoon. I’ll provide an update on our view of the market and some feedback we are hearing from our customers. During the quarter, overall customer demand trended modestly below normal seasonality. As customers adapted to changes in global trade policy, the timing and direction of freight flows were impacted. That said, demand for our intermodal service remains strong. We continue to see customers convert more freight to intermodal from the highway as our commitment to operational excellence, keeping freight secure, and our strong safety record differentiates us from the competition. In our brokerage and truck segments, demand followed more normal seasonal patterns, including some market tightness in May around the annual road check event.
However, the market tightness was relatively short-lived, and truckload spot rates remain soft, suggesting the truckload market, while close to equilibrium, continues to experience some excess capacity. This leads me into some feedback we are hearing from customers around their capacity and service. Customers recognize this cycle is long and ultimately will change. Their conversations with us focus on how to dynamically optimize their supply chain and capacity plans to meet their service needs and budgetary requirements. Customizing our school of services in changing markets has positioned us to be their go-to transportation provider that can deliver differentiating value. Regarding service, all of our businesses and most importantly, our people have been recognized with multiple service awards from our customers.
This translates to realizing some of our highest customer retention numbers in the last five years, more strategic discussions during the bid process, and opportunities for additional freight after bid implementation. I’ll close with some comments on trade policy demand and peak. When we meet with customers, how they are adapting to trade policy remains top of mind. However, accurately forecasting demand is their biggest challenge. Our customer base is diverse, both in terms of size and industry, and each customer continuously adjusts their supply chains to meet their unique needs. Recent examples are some customers have pulled freight forward, some continue to execute demand-driven strategies, and others are making changes to their country of origin and manufacturing plans.
This added complexity, lack of accurate forecasts, and potential for volatility is why our peak season surcharge programs are starting earlier this year. Regardless of customer strategy and the shape of peak season, we will be ready to meet their demand when it occurs. I would now like to turn the call over to Nick.
Nick Hobbs: Thanks, Spencer, and good afternoon. I’ll provide an update on our areas of focus across our operations, followed by an update on our final mile, truckload, and brokerage businesses. I’ll start on our safety performance. A key portion of our company’s focus on operational excellence and driving out costs is our safety performance, which is core to our culture. We are coming off of two consecutive years of record performance measured by DOT preventable accidents per million miles. Our safety results are performing in line with these record performances.
We continue to focus on driving improvements in our performance through proper training and technology to improve safety for our people and the motoring public while we effort to lower our cost. There has been a lot of recent discussion in the industry around some trucking regulations such as English language proficiency, the improper use of B1 visas to haul freight in the US or cabotage, and the new FMCSA biometric ID verification for trucking authorizations. We could only guess the impact this might have on industry capacity. For J.B. Hunt Transport Services, Inc., we do not expect to see material impact. Moving to the business, I’ll start with Final Mile.
The end markets in this business remain challenged with demand for big and bulky products still muted with soft demand for furniture, exercise equipment, and appliances. Demand in our fulfillment network was positive again this quarter, driven by off-price retail. Going forward, our focus remains on continuing to attract new customers to grow this business. That said, we believe recent market conditions will persist through at least year-end, driving our second-half performance to look similar to our first-half performance prior to any consideration for lowering our cost to serve initiatives. We remain focused on providing the highest levels of service, being safe and secure, and ensuring that the value we provide in the market is realized to drive appropriate returns.
Moving to JBT, our focus in this business hasn’t changed. We are working to methodically grow this while remaining disciplined on network balance to drive the best utilization of our trailing assets. Pit season was competitive this year, as it always is, but we are pleased with our success retaining our business, getting modest rate increases, and winning new business with both new and existing customers, as evidenced by our highest second-quarter volume in over a decade. Going forward, we like the progress and direction of this business and the improvements we continue to make.
That said, meaningful improvements in our profitability in this business will be driven by execution on lowering our cost to serve initiatives, rate improvement, and overall demand for truckload drop trailing solutions. I’ll close with ICS. During the second quarter, we saw fairly stable volumes and seasonality. The truckload market tightened around road check and felt like it remained tight a little longer than usual, which compressed our margins in May. That said, spot rates did soften, and we saw margins expand again in June. We are over halfway through the bid season and are pleased with the awards so far, with rates up low to mid-single digits and winning volume with new customers.
Our focus here remains on profitable growth, targeting the right customers where we can differentiate ourselves with service while also diversifying our customer base. Compared to the second quarter last year, we’ve seen our small to mid-sized customer growth up 25%, which remains a focus. Our customer retention rate is near record levels. Going forward, we will remain focused on scaling into our investments while continuing to make improvements on our cost structure and our productivity. With that, now I’d like to turn the call over to Darren.
Darren Field: Thank you, Nick, and thank you to everyone for joining us this afternoon. I’ll review the performance of the Intermodal business and give an update on the market and our areas of focus. I’ll start with Intermodal’s performance. Overall demand for our Intermodal service was strong, and the business proved to be quite resilient in the face of a lot of uncertainties presented at the end of the first quarter. Volumes in the quarter were up 6% year over year and by month were up 11% in April, up 3% in May, and up 4% in June. As it pertains to mix, our transcon volumes decreased 1% during the quarter, and Eastern volume grew 15%.
We want to continue to highlight the strength of our Eastern network volume growth. We compete more directly with truck in this market, and yet with low truck rates and lower fuel prices, continue to see customers convert highway freight to intermodal. This is a result of our combined strong service levels with our rail providers and how that translates into an attractive and valuable cost-saving alternative to truck for our customers. As we wrap up our 2025 bid season, I will remind you of our three-pronged strategy and provide some feedback on our performance. First, we wanted to focus on balancing our network, eliminating the cost to move empties, and more efficiently utilize our trailing capacity.
I believe we were most successful in this area of our strategy. Second, we wanted to grow with both new and existing customers. This growth is not just volume on an absolute basis, but share of wallet in converting customer freight from the highway to intermodal. I believe we were also quite successful on this strategy while remaining disciplined with our pricing. Finally, we needed to get rate to help repair our margins and cover our inflationary costs. To be fair, I don’t know that we ever get as much as we want, but I would say we underperformed our expectations in this area.
To be clear, we believe our overall book of business did price modestly higher year over year as we did achieve increases in our at-haul lanes, partially offset by pressure in the backhaul lanes. We believe the results of this bid season combined with our lowering our cost to serve initiatives can stabilize our margin performance and can be supportive of modest improvements going forward. As a reminder, Q3 is typically the first full quarter that reflects the collective work of our bid season and will be with us through the first half of 2026. During the second quarter, we announced the launch of our Quantum service in Mexico.
We have been growing this service-sensitive offering in the United States and are excited to bring this product to Mexico with our rail providers. Mexico has been the fastest-growing channel at J.B. Hunt Transport Services, Inc., and we continue to see a long runway for growth in this market for many years to come. In closing, we remain very confident in our intermodal franchise and the value we provide for our customers. Our service levels are high, customers trust us, and we have both the capacity and capability to grow well into the future. We believe our performance continues to lead the industry while maintaining a heavy investment in capacity to support our future growth.
