And Hunt officials say they’re also making their peace with Precision Scheduled Railroading, based on comments in a Tuesday earnings call with investors.
Quarterly intermodal revenue was $1.24 billion, up 2% for the same segment in 2018, according Hunt earnings reports. That represents 52%of the company’s revenue.
Transcontinental loads — primarily on BNSF Railway — increased by 7% for the quarter, while loads in the East were off by 11 percent.
Hunt has made substantial investment in information technology and sees that as an avenue for converting more truckload freight to intermodal.
There are at least four factors — five if fuel costs are included — involved in moving freight off highways to rail, according to Terry Matthews, Hunt president of intermodal.
The factors are truck rates, truck capacity, effective rail service, and the economy.
“The railroads want to grow intermodal. Publicly stated, the two eastern roads said they’d like to grow 10% in the East Coast,” Matthews says. “And these four, five factors will be the key as to how we will be able to try to accomplish that goal.”
Other potential growth areas are in transloading and in refrigeration containers, of which J.B. Hunt has a thousand units, according to Matthews.
Hunt CEO John Roberts agrees, citing “some big numbers in those channels that we want to pay attention to. I think the key point is that the railroads are interested, and we definitely can hear them talking with us about what do we need to do to continue to be able to organically convert incremental volumes into their networks.”
Roberts voices a fairly positive attitude toward PSR, describing it as “a little bit of a cleansing activity” and sees it as an indication of railroads meshing with Hunt’s goals of having more transloading activity, reefer traffic, and truckload conversions to intermodal.
About a year ago, Roberts was critical of railroad unreliability which required his company to turn away business but at the time he believed that, while in the short term it would be disruptive, PSR would eventually be a plus for intermodal.
“Service has picked up from where it was last year,” Roberts says. “It’s not where the railroads have targeted to be, but they have definitely improved and it’s helped our velocity and their on-time service through the customer.”
Roberts says there is still “a hangover” from the first four or five months of 2019 when implementation of PSR cost Hunt as many as 70,000 loads.
Although in recent months truckload prices have dropped to being equal to or even below those of intermodal, Matthews says that if intermodal costs go up in 2020, “there’s a probability” that intermodal prices also will increase.
In East Coast markets, trucks remain highly competitive, says Roberts.
Third quarter margins for Hunt were lower than expected due to rail price increases, localized truck driver hiring costs, lower box turns, and the need to reposition empty containers.
The unexpected empty container moves stemmed from customers not providing expected freight volume, according to Matthews.
For the third quarter, Hunt reported net earnings of $151.2 million on revenue of $2.4 billion.
In the old days when passenger trains ran on schedules, and actually arrived on the advertised, the incentive of post office penalties had a salubrious effect on inspiring all involved to make the system work. Is a program of liquidated damages needed to incentivize performance? How would it affect thne bottom line?Comments?
After 100 years, the railroads are still trying to hit their operational targets. Unbelievable. Look at the “crack” high speed freights of the 60’s as a model not PSR.
Make peace with PSR as much as you want; the fact remains that PSR-ed railroads are no longer willing to add new business because it would “imbalance” their precisely-unscheduled and resource-starved operations.
So, maybe CN (who has grown beyond PSR) and BNSF (whose natural immune system protected itself from the disease) are interested; others, probably not so much.
It’s funny that a trucking company is more interested in growing rail business, than most of the class one’s!
I suspect that intermodal is less affected by PSR. It’s less complex and more easily manageable (e.g. a lot less origin/destinations)
Oh no…..more traffic to mess up PSR.
IMO 2020 goes into effect Jan 1 next year. It requires 0.5 %ppm or less sulfur content in HFO. Diesel prices are set to rise substantially next year as capacity for mid distillate will drop.