Shares of J.B. Hunt fell more than 10% on Wednesday following the company’s announcement that it anticipates a decline in third-quarter earnings. The transportation firm reported that profitability is expected to drop between 5% and 10% as it navigates significant cost headwinds.
Brad Delco, the company’s chief financial officer, addressed investors at the Morgan Stanley Industrials conference, emphasizing transparency regarding the financial pressures affecting the quarter. He stated that labor-related expenses, including recruitment, advertising, onboarding, training, and sign-on bonuses, are projected to increase by approximately $25 million in the third quarter compared to the second.
Delco characterized these expenditures as investments in preparation for future growth. However, the company is also contending with volatile fuel markets. He described recent fluctuations in fuel prices as among the most radical and abnormal in the company’s history, with record-high diesel prices creating an estimated $10 million headwind.
Despite these challenges, Delco expressed confidence that volume improvements would help offset the incremental costs. He framed the situation as a timing issue, noting that having visibility into these costs allows the company to plan accordingly. He acknowledged that while J.B. Hunt is actively working to repair its margins, there remains substantial work ahead.
The stock downturn comes after J.B. Hunt shares have nearly doubled over the past year. The company is scheduled to release its formal quarterly earnings report later this month.
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