J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) Q4 2022 Earnings Call Transcript

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Darren Field: Yes. Good morning and thank you for the question. I started to talk about that pivot at the end of Q3 and we certainly saw that play out. And in my prepared comments, I used the word atypical. We certainly saw that throughout the fourth quarter, a continued weakening from October into December. As we sit here right now just through 15, 16 days in January. I would say, we’re consistent with what we saw end of December. However, as Darren mentioned, we do expect sometime maybe second quarter going into third quarter with inventory resets. We would fully expect to see the freight market rebound, but I do feel like this is the area of our company that will most feel the volatility we’ve long discussed and documented what happened in the spot market and that still sits about where it was.

And so, until we see some of that freight demand rebound imports start flowing, I think we’ll be in a comparable environment to what we saw in the fourth quarter in brokerage.

Operator: Our next question comes from Brian Ossenbeck from J.P. Morgan. Your line is open.

Brian Ossenbeck: Hey, good morning. Thanks for taking the question. So, Shelley, maybe you can elaborate a little bit more on some of the caution you’re seeing on the demand side and we’ve touched on it a little bit, but it seems like the general view is that you expect a tough first quarter and then some improvements, sort of towards the middle part of the year. So, Darren, does that give you enough confidence from the demand side and also from the service side, both from the West and the East to really lean in and commit that capacity that you think your customers are going to be there and waiting for? Because it does seem like the timing of the recovery on the service side and demand is going to be a key factor here. So, curious on your thoughts there. Thank you.

Shelley Simpson: Good morning, Brian. We did use the theme word and we have through the whole pandemic and that was being fluid, with our customers and just helping them understand where they’re at and where we’re at from a transportation perspective. We also talked a lot about being cautious in the last discussion. And I think those were some of the demand trends we were starting to see. If you look in the fourth quarter, you saw port activity continue to decline all the way into December. And certainly, we’re feeling the impact from that. As we have talked to customers, they have shared with us that there is an inventory correction happening that you’ve heard both Brad and Darren talk about. And that’s really we expect to continue to occur all through the first quarter.

We have had good signals from our customers about Q2 starting up back to a more normalized or having a more normal environment. We’re not sure at what point that is in Q2, but we do feel like the back half of the year, we have confidence from what our customers are giving us and the data points that they have, what they’re going to be doing from an ordering perspective. The freight recession that we see right now is largely inventory driven. We don’t see anything else from our customers in total. And then last thing I would say, Brian, if you think about bid season for our company in the one-way part of the business, so this should be all of intermodal and all of highway services. Those really occur in the back half of the year fully loaded.

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