J.B . Hunt v. Schneider... Head to Head Match Up

 I always find it interesting to compare these two companies and looking at the 10K's for 2022 and the 10Q's for the first half of 2023 and interesting picture is emerging:

Projection for 2023 at Beginning of Year from 10K:

Summary (Beginning of the Year): JB Hunt and Schneider are two of the largest trucking companies in the US. Both companies reported strong financial results in 2022, but JB Hunt's results were slightly better. JB Hunt also has a more optimistic outlook for 2023.

Here's a quick look at the numbers:

• JB Hunt: Revenue of $18.4 billion, up 27% year-over-year; Net income of $1.7 billion, up 43% year-over-year; Earnings per share of $3.33, up 41% year-over-year.
• Schneider: Revenue of $16.2 billion, up 23% year-over-year; Net income of $1.2 billion, up 22% year-over-year; Earnings per share of $2.45, up 21% year-over-year.

So, which company should be more successful going into 2023? I think JB Hunt is the better choice. It has a stronger track record of revenue growth, and its guidance for 2023 is more optimistic. Additionally, JB Hunt is investing heavily in new technologies, which could give it a competitive advantage in the long run.

Of course, there are some risks to consider. The trucking industry is facing some challenges, such as rising fuel prices and a driver shortage. These challenges could impact both JB Hunt and Schneider, but JB Hunt's stronger financial position gives it a slight edge.

After 1H2023 Has Concluded, How Is The Situation Developing?

Metric JB Hunt Schneider Revenue (first half of 2023) $9.2 billion $8.3 billion Net income (first half of 2023) $778 million $622 million Earnings per share (first half of 2023) $1.55 $1.24

As you can see, JB Hunt's first half of 2023 performance was slightly better than Schneider's. JB Hunt's revenue was up 12% year-over-year, while Schneider's revenue was up 8% year-over-year. JB Hunt's net income was also up 12% year-over-year, while Schneider's net income was up 9% year-over-year.

However, it is important to note that the trucking industry is facing some challenges in the first half of 2023, such as rising fuel prices and a driver shortage. These challenges could impact both JB Hunt and Schneider, but it is too early to say how they will affect the companies' full-year results.

Overall, JB Hunt's first half of 2023 performance is in line with my expectations. The company is still growing and profitable, and it is investing in new technologies to stay ahead of the competition. I believe that JB Hunt is a good investment for the long term.

Here are some additional thoughts on the first half of 2023 performance of JB Hunt and Schneider:

• JB Hunt's intermodal segment, which handles the movement of containers between trucks and trains, performed well in the first half of 2023. This is due to the continued growth of e-commerce, which is driving demand for intermodal transportation.
• Schneider's truckload segment, which handles the movement of freight over long distances, performed more weakly in the first half of 2023. This is due to the driver shortage, which is making it difficult for Schneider to find qualified drivers.
• Both JB Hunt and Schneider are investing in new technologies, such as self-driving trucks and artificial intelligence, to improve their operations. These investments could give the companies a competitive advantage in the long run.

I will continue to monitor the performance of JB Hunt and Schneider in the second half of 2023 and beyond. I believe that both companies are well-positioned for long-term growth.

Wednesday - Mid Week General Thoughts

 Here is just a quick summary of some things I am looking at this week and also some things which just make you go ... hmmmmmm:

1. California Ports 24-Hour Operation is Going Unused - WSJ).  So far the 24 hour out gate at the ports of LA/LB are considered a total bust.  Unfortunately, those making these rules don't understand the "chain" in supply chain.  It is not just about time available.  It is about trucks, drivers, port space, all sorts of workers, chassis and a myriad of other things.  If nothing is done on those fronts, the chain breaks and no amount of extra "open" time will fix it.  More to come but so far I rate the 24 hour port plan a F-.  
   
   
2. Driving up and down the highways at night allows you to see a big part of the problem.  Trucks parked all over the highway as they run out of hours and there is no parking for them.  Is anyone addressing this issue?  Does anyone think that parking on the side of the road, with no facilities and with no safety will attract people to the trucking industry?  Remember, for in trucking for every "machine" you employ you have to employ at least one person.  It is not like manufacturing where a "machine" eliminates the need for a number of people.  In trucking the capital employed to human is 1:1.  Treatment of Drivers: F.
   
   
3. Anyone been to Costco lately?  I have been in one in Michigan and one in Georgia recently and guess what?  The toilet paper shortage appears to be coming back.  This time I think it is more about lack of trucking capacity than anything.  Come on Costco, you can get restocked!
   
   
4. Inventory to Sales Ratios both total and just retail show little to no improvement.  This means my "when will this get better" meter is moving to the beginning of 2023 when I had it pegged at mid year 2022.  Still not coming off of the 2022 but the likelihood of it going into 2023 is getting more real. Likelihood of a quick resolution to the supply chain issues in America ending soon - D
   
   Total Inventory to Sales:
   
   
   
   
   

   Retail Inventory to Sales:
   
   

   

   
   
   
   
5. Port of Savannah is still the best port out there by far however it has been "found" by some big retailers who are slow to move their boxes off the port.  This has meant some ocean carriers have cancelled calls to Savannah and added the Ports of Jacksonville and Charleston.  I think just about everyone is starting to look at "over the water" movements to the East Coast versus getting into the mess of LA/LB then trying to move it over ground. Port of Savannah is an A
   
   
6. JB Hunt  (Stock information: JBHT)is the best run trucking company in America by far.  They knocked their quarter out of the park and they have even better days ahead.  They have transformed from an old school, irregular route trucking company to a high tech, well disciplined supply chain company.  And, the market is rewarding them for it as they have a P/E that values it like a tech company and just about everyone upgraded their stock this week.  YTD J.B. Hunt is up 44.64% as compared to Schneider (SNDR) who is up 19.7%.  (See comparison chart here).  JB Hunt is an A+
   
   
7. Costs continue to rise in all facets of the supply chain:  Various data sources tell us that yes Virginia, there is inflation, and a lot of it. 

OK, I just wanted to pass on some thoughts for mid-week.  Things I am working on include: 

1. Why is the market not putting capital into asset companies?  Just today another $200M investment in a tech company that is supposed to help you find a truck.  So, we keep building apps but we don't staff trucks.  Not helpful but the folks doing investing must know something I do not know. 
   
   
2. Should there be a reserve corps for Supply Chain Professionals?  I am really thinking we need this.  People join just like you would join the Army reserve except it is a national supply chain corps.  You would get the same protections the old "Soldiers and Sailors Relief act" provided and you would get called up as needed.  This would accomplish the same thing as calling up "the military" but you would get a lot more professionals to join as they would not have to do all the "Army Stuff"

More on those topics later.    I thought it fitting to end this post with "Bad Moon Rising" by Credence Clearwater Revival.  This should be the theme song for all supply chain experts!

Another Tough Report from A Carrier - Schneider Has Tough Q32019

The freight recession is real and the carriers are feeling the pain.  We know the smaller carriers are truly suffering however today Schneider (SNDR) reported and it does not appear to be pretty.  First, relative to expectations it was a tough quarter.  From Seeking Alpha:

1. EPS missed by .02 on Non GAAP and by .11 on a GAAP basis
2. Revenue was down 7.7% YoY and missed expectations by $40mm

A couple of key points from their press release:

1. Volumes and price were "compressed" and while they stated there was a "moderate" uplift in the seasonal volume the tone of the message was it was virtually meaningless.  We have learned this from other carriers:  There has been no meaningful "surge" period.
    
2. We knew there were shutdown costs due to the closing of the First to Final Mile business (Which opened to a lot of fanfare about 2 years ago) but I found it surprising they had to impair the value of trucks they are selling.  This tells me they are shrinking the fleet and are actually taking losses on the equipment to dispose of them.
   
3. While their truckload numbers are tough to decipher due to impacts of the FTFM closure and the impairment of tractors, both intermodal and logistics (think brokerage) suffered as well.  Intermodal was down 2% due to volumes and Logistics was down 13% (Blamed on a major customer insourcing). 
   
4. They lowered their guidance from what was $1.30 per share to $1.38 and it is now $1.24 to $1.30.  Again, this appears to be due to the tractor impairment charge.  Interestingly they lowered their CAPEX for the year which again, indicates to me they are shrinking the asset base.  

My opinion is the freight recession is even tougher than originally stated for all carriers.  While I do think there is some "kitchen sink" activity going on here (So many losses due to shutting down the FTFM that they are adding in other stuff to clean up) I think the recession is real.  

Schneider IPO Price Set Between $18 and $20. Big Pay Day for Family

Three things to know about the Schneider (SNDR) IPO (JSonline):

1. The family remains firmly in control - in fact the company will still be considered a "closely held" company. 
2. Family will net about $230M
3. $359M to the company of which roughly half is used to pay down debt and 1/2 to buy chassis.

A Balanced Summary of Where The Trucking Industry Stands

Fleet Owner summarized the FTR Transportation conference with an article about the headwinds facing the transportation industry.  They are real but they are what every business faces - uncertainty. That is what makes a business a business.  Certainty is what utilities have.

Usually the press out of this conference is designed to scare the shippers into paying higher rates than they need to but, at least within this summary, it appears they are becoming more realistic.  Here are some key points:

• 2% GDP growth for the next two to three years (A number I have used for many years now). This is significant because virtually all the transportation executives I know say the real capacity crunch comes at 3% GDP growth.
  
• Eric Starks states the industry will flat in the foreseeable future.  Flat means leaders tend not to know what action to take; what bet to make.
  
• Mark Rourke, President of Schneider claims they have a 4% to 5% productivity decline due to electronic logging devices (ELD) and they have not recovered from this since.  This I will never understand and wish someone would explain.  How can ELD's cause a productivity decline unless you are not already following the Hours of Service (HOS) laws. I would think this would make them more competitive as it will ensure everyone follows the laws.
  

I also think one of the biggest issues facing the trucking industry is just the nature of the "new freight".  With freight now going to central and very large DCs and then parceled out to the consumer, the entire leg of freight going to the store is being eliminated.  Think of this:  Rail gets it to the DC and the part that was truck (DC to Store) is being eliminated.  As leases run out, more and more retailers will close stores and go to on line.  This will have a huge impact to the trucking market.  

Perhaps this outlook (grim as it is) is what is driving the Schneider IPO?

The Fear Trade Picks Up Steam - Don't Be Fooled

One of my favorite songs from childhood is "Won't Be Fooled Again" by The Who and this is my theme for what I have called the "fear trade" in transportation.  This is the time of year when people put their freight out to bid and as expected, and right on queue, some of the major transportation providers are putting out press releases and other statements to start the fear trade - make shippers fearful that truck capacity is magically disappearing and that trucking companies are suffering.

As reported in LogisticsViewpoints, both Schneider and Werner have, on queue and somewhat coordinated, put out press releases and statements saying there is a big problem with capacity, productivity is down and the big bad regulations are making it hard to run their business.  This will, I predict, be echoed by many others over the next few days.  All while earnings at the best run trucking companies are better than they have ever been and OR rates are at record levels (the REAL data in their annual reports).

These statements, of course, are designed to create the fear trade and to get the shippers to buy into a "fear premium" as they go into bid season.  Now, for the real data:

Using CASS data from the October report we see that both expenditures and shipments are down year over year.  In fact in 7 months of 2013 we have seen shipments down year over year which indicates, as CASS rightfully points out, that the economy is slowing and the shippers are finding alternative ways to deal with transportation problems (i.e., network redesigns, packaging, better inventory management etc.).  During these turbulent times it appears shippers have rolled up their sleeves to find innovative ways to solve transportation problems and it appears the transportation industry is issuing press releases.  The graphs below tell the story:

As I reported recently, I told my readers not to overreact to the numbers from September.  They were too strong to be sustained and if you see any other economic indicators you will know that strength was not supported by the underlying economy.  And, this month we find that to be accurate.  They were not supported.

Another interesting statement out of the CASS reporting was that for the first time since 2008 the National Retail Foundation is forecasting a decrease in holiday sales by 2.5% and this is supported by the less than robust holiday stocking.

For sure I am not saying to ignore capacity - if you claim the world is going to end and you live long enough, sooner or later you will be right.  However what I am saying is three-fold:

1.  Let the data speak.  Don't get wrapped up in the fear trade.  Watch this blog, watch the CASS information, watch macro economics and, of course, watch your own sales as a shipper.  These are the most telling indicators.

2. Look at your network and understand your network relative to freight flows.  I have said it many times that transportation is not a homogeneous network.  There are specific lanes (Northbound out of Mexico as an example) that are always under stress.  However, if you ship westbound you should be getting great deals almost always.

3. Understand that there is another side of the equation and that is demand.  Shippers have done an incredible job of productivity enhancements through packaging, product design, loadability studies, and network design which has allowed them to service their customers with higher quality goods at lower costs and lower transportation requirements.  There is no reason to think this will stop.

So, in conclusion, do not get caught up in the fear trade.  Do not think you need to pay a premium now as an insurance policy against future capacity.  One thing is for sure, capacity will flow to where the margins are and even if you pay more now it will not ensure future capacity.  If you pay a premium now you will be in a "Pay me now AND Pay me later" scenario.

Stay calm, stay focused and keep reading the data.

And now, enjoy the Who and Won't Get Fooled Again: