J.B. Hunt Transport Services’ appearance at the Citi 2021 Global Industrials Virtual Conference was this past Tuesday. Its focus was on expectations around long-term intermodal margins.
J.B. Hunt Intermodal Segment Lagging
John Roberts, who is the company’s president and CEO, has said the management plans to go over the season’s bid cycle before making a final decision. Management did acknowledge the intermodal segment had been lagging the long-term goal of 11% to 13% in recent years. This took place on the company’s fourth-quarter call this past January. In fact, the future expectations were under serious review.
The key determinants will be the rate increases as gained this particular cycle as well as bid compliance for those rates, Roberts believes.
Better Handle on Future Expectations Toward Fall
Operating at 91.1% operating ration is what was the company’s intermodal division. In fact, it was the inverse of operating margin which place during the fourth quarter. It was at 90.8% for a full-year 2020. Therefore, the management does expect to have a more solid handle on future expectations by the time the cycle ends in the fall.
There was “a lot of pent-up demand” which Roberts indicated currently in the network. He, in fact, pointed to a large queue of ships that were sitting off the West Coast. They were awaiting a berth to unload. This process he confessed could take until June to find a cure. Moreover, he did believe that near-term service issues on the railroads will stand in the way of long-term growth potential for the mode.
Roberts says he continues to be “optimistic” on the macro environment. However, he noted many smaller businesses are feeling the pressure from COVID-19, which he characterized as “concerning.”
The current inclement weather has led to a various number of gate restrictions. Yet the intermodal segment was “within the boundaries” of the management’s plan to begin the year. Roberts said he was more than likely feeling differently than he did a few weeks ago.