J.B. Hunt shares drop over 10% following earnings warning
CFO Brad Delco cites rising operational costs and fuel price volatility as factors for expected Q3 earnings decline
Quick Look
- Hunt shares fell over 10% after the company projected a 5% to 10% earnings decline for the third quarter.
- CFO Brad Delco attributed the drop to $25 million in increased operational costs and record-high diesel prices, despite expectations for volume growth.
AI-generated summary
Why It Matters
J.B. Hunt has experienced significant stock growth of nearly 100% over the past year. The company is currently facing increased costs related to recruiting, training, and record-high diesel prices.
Shares of J.B. Hunt plunged more than 10% on Wednesday after the trucking company said it expects its earnings to drop in the third quarter.
"We kind of want to be transparent with investors and give an update that in light of these costs that are sort of hitting us, we are expecting our Q2 to Q3 earnings to actually drop 5% to 10%," CFO Brad Delco said at the Morgan Stanley Industrials conference.
Delco said between costs for recruiting, advertising, onboarding, training and sign-on bonuses, the company expects to see about $25 million more in the third quarter compared with the second quarter. He said that means J.B. Hunt is "preparing for growth."
Still, he added the company has also seen "some of the most radical and abnormal swings" in fuel prices that it has ever seen and record-high diesel prices, which are causing at least a $10 million headwind.
Delco added that he expects volumes to improve sequentially to offset the incremental pressures.
"It really is more of a timing issue," he said. "I think you can look at a glass half-empty or a glass half-full. I'm really glad that we have visibility to these costs right now."
Delco also said J.B. Hunt is working on repairing its margins, though he believes the company still has a long way to go.
J.B. Hunt stock has risen nearly 100% over the past year.
What to Watch
AI outlook — possibilities, not facts
Earnings decline of 5% to 10% in Q3
Likely · Within months
Open Questions
- Will volume improvements be sufficient to offset the $25 million cost increase?
- How long will the record-high diesel prices persist?
