J.B. Hunt CFO: Own Drayage Capacity Was 'A Bottleneck,' And Dedicated Contracts Are Being Reopened
Management said driver shortages forced it to slow load bookings, and that price, not cost cuts, now has to repair margins.
J.B. Hunt Chief Financial Officer Darren Hawkins said on the company's earnings call Thursday that the trucker and intermodal carrier could not execute all the freight offered in the third quarter, because the driver market and its own drayage capacity (short-haul truck moves to and from rail terminals) ran tight. He said the company "had to slow down load bookings" at times to honor commitments.
A bottleneck the company is not used to
Hawkins said volumes available in the third quarter exceeded what J.B. Hunt could handle. He said he does not remember a time when its "own drayage capacity became a little bit of a bottleneck for us," and called it "a little bit of a surprising position to be in."
He added: "That's not something we're used to." He cautioned that the 8% volume growth in the quarter should not be read as the ceiling on what the company can do, and said hiring drivers had gone well as the quarter went on.
Hawkins said pricing must outpace inflationary costs, or the company must take costs out. The easy cost initiatives are going to be very difficult in this environment, he said, so "it is more about price at this point." Customers pushed back on increases early in the year, he said, but the talks have become more realistic. "No customer is handing us money," he said.
Dedicated contracts are open for review
Asked by a Goldman Sachs analyst whether contracts signed months ago are being reopened, Brad Hicks, President of Dedicated Contract Services, answered yes. He said nothing in the agreements stops the company from revisiting economics with customers.
Hicks said the fixes include helping fund sign-on bonuses and, in some cases, "a dramatic W-2 adjustment." The company is "evaluating the entire book of business," he said, starting with customers with the greatest needs, and will address all of them "throughout the next few quarters."
Brad Delco, listed as Chief Peo
Brad Delco, listed on the call as Chief People Officer, said Dedicated has the most drivers and employees, so more than half of the cost of hiring, recruiting and training drivers sat there. It also posted the largest miss against forecast on group medical costs, he said.
Capital and the margin priority
Delco said average invested capital in the third quarter of 2026 was down about $400 million from a year earlier, with about a 200 basis point (two percentage point) improvement in return on invested capital. He said trailing 12-month operating income was up 16 or 17%, mostly without help from price.
Executive Vice President and Chief Operating Officer Shelley Simpson closed the call by naming margin repair as the priority into next year. She said customer sentiment is at the highest place the company has been.
Hawkins said the market is the best environment to improve margins, and that \"we'll let our results be the proof.\"
