J.B. Hunt reports weak Q2, but end of freight recession may be on the horizon

Despite J.B. Hunt reporting an abysmal second quarter in its latest earnings report, some freight analysts predict the culmination of the freight recession by the end of the year.

On Tuesday, July 16, J.B. Hunt revealed some significant losses during the second quarter of this year. The megacarrier is the first among the nation’s largest trucking companies to release its second quarter earnings report and is widely seen as an indicator for the state of the overall freight market.

The company reported its overall operating income decreased by 24% in the second quarter. Drilling down to its intermodal segment, operating income went down by 31%. Its intermodal segment represents nearly half of its total revenue and operating income. Increases in driver wages and benefits, insurance and maintenance contributed to the decline.

“While experiencing some seasonal build in demand through the quarter, overall performance continued to be pressured by the soft freight market and its impact on over-the-road truck competition in the eastern network,” J.B. Hunt stated in a news release.

Operating income for J.B. Hunt’s dedicated segment fell by 15%. The truckload segment dropped by 7%. The company’s dedicated operations account for 29% of total revenue and nearly half of operating income.

Revenue per load in the intermodal segment was down nearly 5% compared to the second quarter of 2023. In the dedicated segment, revenue per truck per week dropped from $5,182 last year to $5,004.

As of Friday, July 19, J.B. Hunt’s stock price had dropped 7% from its price on Tuesday morning. Year to date, the stock price was down 17%. However, prices were up nearly 4% over the previous month.

Other large trucking companies are experiencing a similar rebound. Landstar stock is down 3% year to date but up 1.5% in the past 30 days. Year to date, Knight-Swift stock has dropped 13%, but has increased by 7% since June 18. Over at Schneider, prices are down 3% since January but up 11.5% since June.

End in sight?

A sluggish first half of the year was mostly expected, but some analysts are seeing signs that the freight recession may lift as soon as the end of the year.

In its most recent monthly economic report, fleet-management company Motive predicted a more positive second half and perhaps the beginning of the end to the freight recession that began two years ago.

Motive expects trucking rates to increase in the second half of the year, possibly forcing retailers to move away from a low-inventory strategy. Predictably low rates have led retailers to do last-minute stocking, knowing spot rates will be low. Possible higher trucking rates further down the road may incentivize retailers to stock up now, while shipping rates are relatively cheap.

Higher trucking rates may be on the horizon as capacity shows signs of stabilizing. Growth in carriers is starting to resemble the more sustainable growth the freight market was experiencing before the pandemic. According to Motive, the percentage of new carriers in June was 2.1%, similar to the June 2019 rate of 2.25%. In the immediate aftermath of the pandemic, new registrants represented as much as 4.5% of total carriers.

“The freight recession is on its way out, and the trucking market will steadily move in a positive direction in the second half of the year,” Motive stated in its report.

Nearly 2,000 carriers exited the freight market in June, a 60% increase from the previous month. However, that was nearly 60% fewer exits than in December 2023. There were half as many carriers leaving the industry in the second quarter compared to the first quarter.

Last month, trucking jobs remained flat. However, the number of trucking jobs is down by more than 3,000 for the year, with total employment in trucking down by 30,000 jobs compared to a year ago. Most of that year-to-year job loss can be attributed to the collapse of Yellow Corp., which cost the economy well north of 30,000 trucking jobs.

Motive’s prediction of the freight recession nearing an end may be overly optimistic.

With overcapacity a major factor in the ultra-low rates, stabilization will not help move rates higher. David Spencer, vice president of market intelligence at Arrive Logistics, has anticipated further job losses for the remainder of the year. However, it may not be enough to move the industry out of the freight recession before 2025.

“We are encouraged by the relative year-over-year growth in volatility this summer peak season but still feel the indicators point to a full rate recovery in 2025, at the earliest,” Spencer told Land Line. “As such, we think stability in employment levels is a best-case scenario in the short term.”

That jibes with the assessment given by Avery Vise, Freight Transportation Research Associates (FTR) vice president of trucking, in FTR’s latest Trucking Conditions Index report. Although the index hit positive numbers for the first time in about two years in May, Vise said this was likely an outlier and that the index will go back to negative territory through at least late this year. Getting out of the freight recession before then does not seem probable.

“Trucking is in the initial stages of a recovery, although it might be months before market participants perceive much change,” Vise said. “We expect rates to be mostly stable overall through late this year, with spot rates leading the way. However, the capacity overhang remains large and will delay anything that could remotely be called a rebound.”

The OOIDA Foundation likewise is looking further out for relief from the freight recession. And in its most recent market update, it also pointed to overcapacity delaying a rebound.

“Contrary to several articles out there, don’t expect the new freight cycle to start materializing anytime soon, or even this year,” the Foundation stated in May’s market update. “It’s becoming more likely that the next cycle won’t begin until Q2 2025.” LL