J.B. Hunt Faces Margin Squeeze As Spot Rates Surge: Analyst

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) said peak season unfolded largely as expected, neither strong nor weak, but warned that freight conditions remain especially challenging, with persistent pressure in its brokerage business. Against that backdrop, Bank of America Securities analyst Ken Hoexter raised his price forecast for J.B. Hunt Transport Services to $216 from $208, while keeping a Buy rating. Hoexter wrote that while the company’s peak-season commentary suggested stability in volumes, the broader freight market remains difficult, particularly in brokerage. Also Read: Why Are Trucking Stocks Suddenly Hot On Wall Street? In the note, Hoexter pointed to CEO Shelley Simpson’s comments that demand was strong, but inflation is pressuring performance. Surging Spot Rates and Margin Squeeze To explain the squeeze, Hoexter wrote that DAT Dry Van spot rates surged to $1.73 per mile this week from $1.65 last week, the highest since January 2023, and up 4.7% from third-quarter averages. He added that the above-normal seasonal lift, driven by supply constraints, marks the fourth consecutive week of elevated increases, outpacing the four-year weekly average of 1.4%. With buy rates rising faster than pricing can reset, Hoexter expects margins to be pressured in Brokerage (ICS) and Truckload (JBT), with the fourth-quarter ICS operating ratio forecasted to deteriorate 120 bps to 100.5%. Hoexter reiterated Intermodal targets of 540.5k loads (up 0.1% sequentially), revenue per load flat at $2,836 due to mix changes, and a 92.0% operating ratio (down 40 bps sequentially but up 70 bps year-over-year). That implies Intermodal operating income of $123 million, flat sequentially, he said. Hoexter also sees Dedicated operating income of $104 million, flat sequentially, with a slightly improved operating ratio of 88.1% versus 88.7%, reflecting a normal seasonal decline. For Final Mile, Hoexter expects a seasonal fourth-quarter lift, but said demand for bulky items like exercise equipment remains weak and the housing market is soft. As a result, he lowered the Final Mile revenue growth target to -10% year over year (from -6%) and revised the operating ratio target to 97.0% (from 96.5%). Hoexter also revised his fourth-quarter EPS estimate down 3% to $1.82 (from $1.87) while keeping his 2026 EPS forecast unchanged at $7.30. JBHT Price Action: JBHT shares were down 1.01% at $194.78 at the time of publication on Wednesday, according to Benzinga Pro data. Read Next: Plug Power Adds Extra Juice To Africa’s Green Hydrogen Ambitions Photo via Shutterstock