J.B. Hunt Pricing Spineometer: 5 of 5 Vertebrae

J.B. Hunt, a trucking and logistics company, had a negative Q2 2024. Revenue fell 6.5 % to $2.9 billion and earnings before interest and taxes fell 24 % to $206 million over the same period last year.

A review of J.B. Hunt’s 16 July 2024 earnings call and associated financial reports provided insight regarding the importance of pricing on performance.

J.B. Hunt executives reported many business challenges in the current economic environment.  Soft demand leading to lower asset utilization and increased price competition coupled with higher costs in wages, equipment maintenance, insurance, and claims combined to deliver a less than stellar quarter.

Executive after executive also demonstrated a high awareness of the importance of price management through this difficult time.

• John Khulow, CFO at J.B. Hunt, stated “A combination of either lower volumes and our yields, but most notably lower rates were the main drivers of the lower revenue”
• Darren Field, President of Intermodal at J.B. Hunt, stated “Over the long term, pricing will always be the most valuable element to improving margins more than volume or just operational efficiency.”
• Brad Hicks, President of Highway Services and EVP of People at J.B. Hunt, stated “This season was competitive, and we opted to remain disciplined on price, which resulted in some lost volume.”
• And Shelley Simpson, CEO at J.B. Hunt, summed up the economic environment and competitive situation stating “We’re in an inflationary cost perspective with price pressure coming down. And those two things really is the first time I’ve seen that at least in my history inside the organization.”

Benchmarks would suggest J.B. Hunt to have 25 to 125 pricing professionals.

1. At the transactional level, J.B. Hunt must bid for many of its contracts. This implies a scope for sales-negotiated pricing and a need for transactional pricing variance management. Both people and technology are typically deployed to address these challenges and provide salespeople with useful price guidance and executives with actionable data for approving or disapproving deals.
2. With operations across the country and different demand dynamics between the West Coast, East Coast, transcontinental, and north-south shipping routes, we would expect some pricing people to be focused on geographic-specific pricing.
3. From a price structure viewpoint, J.B. Hunt reports managing prices with indices in long-term contracts and is likely to use a mixture of unit pricing and yield management for other offerings, specifically yield management for intermodal shipments.
4. The macroeconomic environment today has a large impact on financial performance at J.B. Hunt, just as it had at the beginning of the pandemic and during the ’08 great recession. The significant and somewhat predictable impact of economic cycles on their businesses would suggest J.B. Hunt would benefit from having an applied economics team to help forecast impacts, identify mitigating approaches, and prevent destructive responses to economic challenges.
5. Other factors, such as business model changes or new offering launches likely require less frequent direct expertise of a pricing expert at J.B. Hunt and might be outsourced upon demand.

Research into the investment by J.B. Hunt in pricing yielded overwhelmingly positive results.

1. The pricing team was well over 100 strong. Though most worked at their headquarters in Arkansas (and should have attended our Bentonville Pricing and Profit Management Networking event in February), some were found in other cities around the nation.
2. Pricing titles varied from analyst and manager to director and vice president. More than one vice president of pricing was found in the intermodal area alone.
3. Responsibilities included yield management, product innovation, data insights, and economic analysis. Often pricing professionals were associated with specific lines of business such as intermodal, refrigerated shipping, truckload, final mile, integrated capacity solutions, and dedicated contract services.

These results place J.B. Hunt far above expectations.

Shelley Simpson, the current CEO at J.B. Hunt, came from a strong pricing background.  She was a pricing manager in ’96, then senior pricing manager, director of pricing and yield management, director of economic analysis, to VP of economic analysis all before becoming an SVP of finance and administration in ‘05 and moving forward to gain her current role as President and Chief Executive Officer.  Shelley Simpson has experienced, firsthand, the importance and impact of pricing on business performance.  For other readers, take note that pricing as a career path can and does regularly lead to the executive suite.

Given the importance and capability of pricing at J.B. Hunt as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of July 2024.

J.B. Hunt Pricing Spineometer: 5 out of 5 Vertebrae. (6 is not possible at this time, but they join a very elite group along with Waste Management, Parker, Republic Services, and a few others.)

JBHT (J.B. Hunt Transport Services, Inc.) fell from 169 the day prior to their earnings call to 164 one day later. FY 2023 revenue of $12.8 billion with an 8% operating margin and P/E ratio hovering around 25.

For FY 2023, a 1% improvement in price would yield a 13% improvement in operating profits holding all else constant at J.B. Hunt.