Intermodal Volume Trends Moderate in Hub’s 1Q

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In the first quarter, Hub Group’s consolidated gross revenue expanded 4% from the same period last year. The year-over-year top-line increase reflects legacy-intermodal volume expansion and higher yields, as well as continued load growth in the Hub brokerage unit. Mode segment gross revenue was about flat from last year as intermodal growth offset declines in brokerage.

In the legacy Hub businesses, brokerage revenue was up 4%, reflecting 4% volume growth; pricing was flat. Brokerage growth moderated from the 6% year-over-year gains posted in the second half of 2012. That said, recent trends compare favorably to high-single-digit revenue declines during the first half of 2012. Analyts think recent progress is due in part to improving sales execution and better capacity procurement following previous restructuring efforts. Unyson Logistics’ revenue increased 3% (versus a 4% fall in fourth quarter 2012) as the firm made progress on-boarding new business. Management expects the segment’s recent new business wins to contribute to better growth trends throughout the remainder of 2013.

Also important, Hub’s core intermodal sales expanded 6%; volume increased 2%, while pricing (including rates, fuel and mix) expanded 4%. Pricing remains competitive, but management’s commentary suggests it is somewhat pleased with progress thus far during the bid season, which is roughly half over. Year-over-year intermodal volume gains moderated from 8% in the second half of last year. Despite decent truck conversion activity throughout the industry, moderating load trends are not a surprise given relatively sluggish macroeconomic conditions.

The firm’s consolidated operating margin improved 20 basis points to 3.2%, with help from better cost execution at Mode and slightly higher Hub segment gross margins (largely from optimization efforts in the logistics unit, as brokerage and intermodal gross margins were flat). Management expects 2013 EPS in a range of $2.00-$2.15, which brackets previous Street consensus of $2.08.

 

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