Sequential January over December was up 9% and up 4% year-over-year. And we think those are good indicators. And within that brokerage piece and over the road that, we did see some spot price inflation. We’d like to see some more of that continue through the quarter. And we think it will as we start to see some of that spring restocking, and as we go through March and into April. So, I think that’s a big part of it. As far as the rail services, Brian go, we – throughout 2023. We saw continuous quarter-over-quarter service improvements from – both of our rail partners. And they’re at a very good, good place. They’re continuing that improvement that’s compounding over the fourth quarter into this year. I’d say in addition to the consistency that, we’ve seen in their rail service.
We’re also seeing them be more nimble and quicker to respond to disruptions, whether it be weather and they recover very quick. So shippers are noticing that as well and becoming more competent and in those conversions.
Phil Yeager: Yes, I think we’re using the most recent winter weather disruption as a rebound in service. That was very quick as a proof point for a lot of our customers. And I think a lot of many of our customers are thinking about how they want to lock in capacity right now as well, and that there likely will be an inflection, at some point this year. I don’t think anybody’s calling a change in the market. And that’s not really built into our guidance. But we’re certainly hopeful that we’re seeing the positive trends that will lead to that.
Brian Ossenbeck: Okay. I appreciate all that. Thanks for the time.
Operator: Thank you. Our next question comes from the line of Bascome Majors of Susquehanna. Please go ahead, Bascome.
Bascome Majors: It sounds like the intermodal outlook for the second half, you’re expecting slightly positive pricing, slightly favorable calls for a nice price call spread. I’m curious if the pricing comes in more neutral, with cost for a kind of breakeven spread there. Do you still think the low end of your guidance, could hold if that’s what the second half gives us? Thank you.
Kevin Beth: Yes, absolutely. I don’t think – we did not build this guidance with a large market improvement in mind. As I mentioned, there’s some upside factors as well in there around share repurchases. And certainly, if we don’t see the market stabilized, we have levers we can pull to continue to improve our overall cost structure. So absolutely.
Phil Yeager: Yes, I think the cost both, the dynamic rail contract that we have will help allow for that, Bascome, as well as our insourcing of the drayage and the new chassis agreement all should help be able to allow for hitting that low end of the guidance.
Bascome Majors: In your prepared remarks, you talked about in recent years cash EPS being, call it, $0.35 higher than reported EPS. And clearly that goes up with the acquisition this year. Do you have a preliminary purchase price allocation sense of what that GAAP will be in 2024?
Kevin Beth: Yes, we think preliminary, low teens is probably the additional amortization. Certainly that that’s not done yet, and probably won’t be done until the end of the quarter. But yes, that’s our preliminary.
Bascome Majors: I’m sorry, low teens. Do you mean like $0.10 to $0.15 or 10% percent of $0.35?
Kevin Beth: Yes, sorry. No, actually I was speaking – in actual dollars. So, yes about $12 million, $15 million of amortization, additional amortization expense from the acquisition. That’s what you’re looking for.
Bascome Majors: I’m sorry. Thank you for the time.
Operator: Thank you. Our next question comes from the line of Brady Lierz of Stephens. Your questions, please, Brady.
Brady Lierz: Okay. Great. Thanks. This is Brady on for Justin. I wanted to ask if you could share what your guidance is assuming for margins in logistics. And maybe if you could just share any color on the cadence of margins in that segment in 1Q and then kind of as we move through the year?
Phil Yeager: Sure, Brady. I think actually similar to what we’ve been talking about with ITS. It’s going to start off a little lower than we would certainly like it just due to lower transactional volume. The spot market and the brokerage pricing right now is a tough headwind to battle. But we’re expecting that to increase as our contractual rates on the truck market improve. And also as the Final Mile integration that happens, we have a lot of upside there as well to help with the DOI of the logistics segment.
Kevin Beth: Yes. So I would think about it as adjusted operating margin percent from Q4 is probably relatively flattish to Q1, and then we would anticipate sequentially improving.
Brady Lierz: Okay. Great. Thanks very helpful. And then maybe you could just talk about the growth that you’re assuming on an organic basis in logistics. And maybe any updated thoughts on kind of what you view as a normalized margin for the segment, including the recent acquisition?
Brian Alexander: Sure. Yes, this is Brian. I’ll talk a little bit about that. I think what we’ve seen, obviously, is in our logistics segment is our brokerage standing out and continuing to grow volume. We expect that volume to grow into the double digits, low double digits as we go into this year. Like I said, we’ve already seen that in January starting to materialize. I think also within our brokerage, what we’re seeing is their ability to cross-sell across all of Hub Group, and they’re adding new logos and then those logos are cross-selling throughout logistics. Within our Final Mile, we’ve added those appliance capabilities, but we’ve also seen that cross-sell pipeline open very quickly with materializing wins ready to onboard in Q2.
So that will be another good piece of that revenue stream. And then as we think about our network, which I’ve mentioned is 11 million square feet, that helps enable our cross-selling and our growth with strong pipelines for that network as well as our managed trans. I’ve also indicated too, as we’ve done this, we do see a higher retention rate of our customers. We see them being less price sensitive and a higher rate of return with those solutions that we deliver across our logistics offerings.
Phil Yeager: Yes. Obviously, the highest growth rate would be in the Final Mile just given the incremental revenues there. I would say following that would be managed trans because we have some locked-in wins that are starting up actually in February. So we’re excited about that. Brokerage, we didn’t assume a massive amount of growth just given we don’t know exactly how the market is going to look. And then with the consolidation, we said things would be a little bit more muted, but maybe just some organic growth in overall volume and velocity. So not anything massive, but actually up year-over-year.
Brady Lierz: Okay. Great, thanks guys. I’ll leave it there.
Phil Yeager: Thank you. Thanks Brady.
Operator: Thank you. Our next question comes from the line of Thomas Wadewitz of UBS. Your questions, please, Thomas.
