Hub Group’s Q2 earnings tumble in ‘challenging’ freight economy

Hub Group’s revenue and profits fell in the second quarter compared to last year’s record-breaking results.

The transportation provider reported second-quarter earnings per share (EPS) of $1.44, 3 cents better than the analysts’ estimate of $1.41 but a 52% year-over-year (y/y) decline compared to the same period in 2022.

Revenue for the quarter came in at $1 billion versus the analysts’ estimate of $1.12 billion. Second-quarter revenue declined 29% compared to 2022, when Hub Group reported revenue of $1.4 billion, a quarterly record.

“The freight economy is a challenge this year and that trend continued in the second quarter,” Phil Yeager, Hub Group’s president and CEO, said during the earnings call Thursday. “Import volumes have been lower driven by elevated inventories and the industry has yet to exit surplus capacity. This has in turn driven down rates to our customers and decreased spot market activity, putting pressure on our more transactional services.”

Oak Brook, Illinois-based Hub Group (NASDAQ: HUBG) is a provider of transportation and logistics management solutions.

Hub Group Q2/23 Q2/22 Y/Y % Change
Revenue $1B $1.4B (29%)
Intermodal and transportation solutions $615M $875M (29%)
Logistics $454M $549M (17%)
EPS $1.44 $3.03 (52%)
Hub Group Q1 earnings. $ in millions, except EPS

Broken down by segments, intermodal and transportation solutions’ second-quarter revenue was $615 million, a 29% y/y decline. Intermodal volumes during the quarter declined 17% compared to the same period in 2022. 

Transcontinental intermodal volume declined 9% y/y, the local West declined 19% y/y and the local East declined 17% y/y, according to COO Brian Alexander.

Yeager said discussions with customers indicate inventories are coming back into line and there will be a need to get back to more normalized shipping levels.

“I think at the same time, you’re starting to see a realization for many of our customers that the low spot market rates that have been out there for quite some time are going to come under pressure,” Yeager said. “We’re seeing that already in Southern California as pricing has really solidified and gone up somewhat on the spot market. You’re seeing that in the Southeast coast as well.”

Yeager also sees a desire from shippers “to get back to pushing the majority of their freight through the West Coast ports just based on speed and cost-effectiveness. I think that if that stability is maintained leading into next year, there’s an even bigger opportunity.”

Second-quarter logistics segment revenue was $454 million, as compared to $549 million in the prior year. The decline in revenue was driven by lower revenue per load in the brokerage service line and lower managed transportation service line revenue, partially offset by revenue from e-commerce fulfillment company Tagg Logistics, which Hub Group acquired last year.

Hub Group updated its 2023 outlook based on “one of the softest demand environments we’ve seen in some time,” according to CFO Geoff DeMartino.

“For 2023, we expect to generate diluted EPS of between $5.80 and $6.40 per share,” DeMartino said. “We expect revenue will range from $4.3 billion to $4.5 billion.”

For the rest of the year, Hub Group is forecasting high-single-digit volume declines in intermodal. 

“The remainder of the year will be impacted by softer pricing and less surcharge revenue, which will be partially offset by lower purchase transportation costs and improved operating efficiency,” DeMartino said.

During the second quarter, Hub Group also returned $100 million of capital to its shareholders through share repurchases.

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