J.B. Hunt Transport Services, Inc. earnings

Management highlights

### Overall Corporate Strategy - Prioritize disciplined growth through operational excellence, sustained cost control, and structural cost reduction. Over the past 12 months, the company has removed over $135 million in structural costs to improve operating leverage and customer experience across all cycles. - Leverage prior investments in people, technology, and capacity to build sustainable competitive advantages, with a core focus on repairing margins and delivering long-term shareholder returns. - Transparent pricing conversations with customers, emphasizing the need to align rates with the rising cost of capacity to generate appropriate returns for shareholders. ### Market Dynamics - Industry truckload capacity has tightened significantly, driven by increased safety-focused regulatory enforcement, higher carrier operating costs, and persistent driver supply constraints. Capacity tightening accelerated after the annual May road check event, with industry indicators (tender rejection rates, spot rates, driver employment) moving to levels not seen since 2021-2022. - Freight demand has improved modestly quarter-over-quarter, with resilient U.S. consumer demand and improving demand across most industrial markets. J.B. Hunt outperformed the broader market, gaining share across all segments. - Customers are increasingly consolidating freight with large, reliable providers capable of delivering scaled capacity, and are initiating more frequent out-of-cycle/mini bids to align pricing with current market conditions. ### Operational Highlights - Safety performance improved 11% year-to-date (measured by DOT preventable accidents per million miles), a core competitive and cultural priority for the firm. - Drayage capacity for intermodal: the company's in-source drayage strategy (owning tractors, containers, and chassis, utilizing primarily company drivers) is a meaningful competitive advantage, reducing reliance on costly, unreliable third-party capacity amid industry-wide driver tightness. - Capital allocation remains disciplined: priority is first given to reinvesting in the business for attractive long-term returns, followed by maintaining a strong investment-grade balance sheet, growing the dividend, and opportunistic share repurchases. Most current capacity has already been funded.

Guidance

- Full-year 2026: DCS maintains its prior guidance of modest operating income growth alongside returning to fleet growth, and remains on track to hit its full-year truck sales target of 1,000 to 1,200 units. - Intermodal: Management expects significant pricing improvement through the remainder of 2026 and the 2027 bid season, as the current wide gap between truckload and intermodal rates closes back to the historical 10-15% sustainable discount range for intermodal. - 2026 peak season: Management expects peak season timing and shape to be similar to 2025, with import peak timing potentially varying, but the lag to domestic peak matching consumer demand remaining consistent. The company is already prepared via proactive peak capacity agreements with most customers. - Volume growth: Intermodal demand is described as extraordinarily strong, but management will remain disciplined in onboarding only high-quality, sticky volume that delivers appropriate returns, limiting growth to match available driver and drayage capacity.

Segment performance

1. J.B. Hunt Intermodal (JBI): Quarterly volumes hit a record of over 578,000 loads, up 10% year-over-year (first double-digit volume growth in over a decade). Transcon volume grew 5% while Eastern volume increased 16% (31% on a two-year stacked basis). Positive year-over-year ex-fuel pricing, and gross margins improved sequentially from the first quarter. It contributes ~40% of total company volume. 2. Dedicated Contract Services (DCS): Performance was resilient, with a record safety performance and a record sales pipeline (by number of trucks). Sold ~250 trucks in the quarter, on track to hit full-year 2026 gross truck sales target of 1,000 to 1,200 new trucks. Fuel created a ~100 basis point headwind to operating margin percentage in the quarter, but the business remains near its margin target. It is on track for modest full-year operating income growth amid planned fleet expansion. 3. J.B. Hunt Truckload (JBT): Achieved fifth consecutive quarter of double-digit volume growth, with 14% load growth and 35% year-over-year revenue increase. Gross profit declined 12% due to higher third-party purchased transportation costs at current spot market rates. Legacy pricing implemented months ago is no longer aligned with current market costs. 4. Intermodal Container Services (ICS): Secured double-digit rate increases during recent bid season, with strong volume growth. Gross margins improved sequentially from the first quarter, as new and renewed contracts are priced closer to current market conditions, partially offsetting JBT margin pressure. 5. Final Mile: Demand remained stable across core end markets (furniture, exercise equipment, appliances), with strong demand in fulfillment driven by off-price retail channels. It is working to offset a previously disclosed $90 million disciplined revenue headwind, while maintaining high service and safety standards.

Risks & headwinds

- Industry-wide driver supply tightness increases wage pressure across all segments, creating a capacity headwind that is expected to persist long-term with no quick solution. - Rail service could face temporary headwinds as rail providers adjust capacity to accommodate faster-than-expected intermodal volume growth, though management is not concerned about long-term rail service constraints. - Legacy contracted pricing (implemented 6-10 months ago) across multiple segments is not aligned with current market costs for capacity and labor, creating near-term margin pressure until contracts are renewed. - JBT faces higher margin pressure than other segments due to its reliance on third-party capacity purchased at current elevated spot rates, with less near-term opportunity to offset costs compared to ICS. - DCS new fleet growth requires startup expenses that will delay profitability improvements, even as the sales pipeline grows.

Analyst Q&A

• Q: What is the prevalence of multi-year intermodal contracts, and what non-renewal opportunities exist to grow revenue per load?

  A: Management did not disclose the share of multi-year contracts, noting these agreements have more stable pricing than shorter-term contracts. The frequency of customer-initiated mini-bids hit a record in Q2 2026, as customers reset their networks amid capacity shortages. These are not small adjustments, but large-scale re-bidding events that create widespread opportunities to align pricing with current market conditions across all of J.B. Hunt's services.

• Q: How will intermodal realized yields trend in H2 2026 with mini-bids and peak season? Will the gap between intermodal and truckload rates close?

  A: Management did not provide a specific yield forecast, but confirmed widespread pricing opportunity exists. The gap between current intermodal contract rates and truckload rates has grown significantly, as most intermodal contracts are 6-10 months old. As new business is onboarded through the rest of the year, the gap will close, with pricing expected to offset inflationary pressures (driver wages, rail cost increases) and deliver modest margin expansion.

• Q: What impact has the Montgomery decision had on capacity and insurance costs for ICS and asset-based segments?

  A: J.B. Hunt already exceeds federal minimum requirements for carrier safety and selection, with continuous dynamic monitoring, so the firm has no increased risk exposure from the ruling. Management has observed more small carriers migrating to J.B. Hunt's platform from smaller brokers, and DCS has seen increased customer interest in dedicated solutions, partially driven by shippers seeking reliable, compliant partners after the ruling, contributing to DCS's record sales pipeline.

• Q: What is the current level of excess intermodal container capacity, and when will the company start purchasing new equipment?

  A: After 10% volume growth in 2026, management estimates there is still ~10% excess container capacity available, plus additional productivity gains from faster container turns in the fast-growing Eastern network. Thousands of containers remain available in storage to support growth. The company will not approve new container purchases until it has fully maximized productivity and utilization of its existing fleet.