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F500-2021-315-J.B. Hunt Transport Services

Working with clients in the United States, Canada, and Mexico, the company provides freight transportation services and logistics.

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F500-2020-346-JB-Hunt-Transport-Services

This long-haul truck operator has produced a 15% average annual return for shareholders over the past decade. In the first quarter of 2020, J.B. Hunt took a $12.3 million charge to pay one-time $500 bonuses to drivers and frontline personnel who have kept freight moving during the pandemic.

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J.B. Hunt Transport Services specializes in freight shipping, providing surface transportation, delivery, and logistics services. J.B. Hunt operates through five segments: intermodal (JBI), dedicated contract services (DCS), integrated capacity solutions (ICS), final mile services (FMS), and truckload (JBT). The company operates across the U.S. and has an intermodal service partnership with a rail provider in Mexico.

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J.B. Hunt Transport Services (JBHT): Company Profile, Stock Price, News, Rankings

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J.B. Hunt Transport Services

j.b. hunt transport services

Good afternoon, and welcome to the J. B. Hunt Transport First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions.

Please note that this event is being recorded. I would now like to turn the conference over to Brad Delco, Senior Vice President of Finance. Please go ahead.

Good afternoon. Before I introduce the speakers, I would like to provide some disclosures regarding forward looking statements. This call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward looking statements. These statements are based on J.

B. Hunt's current plans and expectations and involve risks and uncertainties that could cause future activities and results to be materially different from those set forth in the forward looking statements. For more information regarding risk factors, please refer to J. B. Hunt's annual report on Form 10 ks and other reports and filings with the Securities and Exchange Commission.

Now, I would like to introduce the speakers on today's call. This afternoon, I am joined by our President and CEO, Shelly Simpson our CFO, John Kulou Spencer Fraser, our EVP of Sales and Marketing our COO and President of Highway Services and Final Mile, Nick Hobbs Brad Hicks, President of Dedicated Contract Services and Darren Field, President of Intermodal. I'd now like to turn the call over to our CEO, Ms. Shelly Simpson, for some opening comments. Shelly?

Thank you, Brad, and good afternoon. The team will provide more details on each of our business segments, but at a high level, our results during the first quarter came in largely as we expected and as we shared with you back in January. I continue to be proud of the work of our team and remain confident that we have better positioned the company for future growth and success. We are seeing our service performance provide us benefits during this bid season. Safety is core to our company's culture and we continue to improve on our key metrics despite following two consecutive years of record setting performance.

We also remain focused and disciplined on our cost without sacrificing on our strategic investments in our people, technology and capacity. We are well positioned to scale into and leverage these investments as we grow in our large addressable markets served by our portfolio of services. As we've shared, we are not pleased with our returns and efforts across the organization continue to reduce and eliminate costs, refine our capital plans and drive further productivity across our businesses. As I said last quarter, beginning to repair our margins and improve our financial performance remains a top priority for our leaders and our company. Looking ahead, while headlines are changing daily, our overall strategy and focus as an organization remains the same, be operationally excellent, provide a valuable service for our customers that is critical to their business needs and scale into our strategic investments.

That said, our executive team has explored various options we might implore to more aggressively eliminate costs in some of our scenario planning analysis. However, we are fortunate in that our assets move to where our demand for our services originate, so we will have to stay agile and make quick decisions if the market dynamics change. We will stay informed by our internal data, customer feedback and outlook and make decisions as needed to maximize long term value for our shareholders. Before turning this over to the team, I'll close with this. The strength of our business supported our investments during this challenging freight environment, while meaningfully enhancing the future earnings potential of our company.

While the timing of the market inflection still remains uncertain, we will exit from a position of strength, which is unique in our industry and becoming even more unique each day. We have proven our service levels and safety culture are unmatched. We had record first quarter intermodal volumes, dedicated continues to have industry leading margins and we're seeing signs of improvement in our highway businesses. Our brand is very strong customers and we have the talent, systems and capacity to support our future growth. With that, I'd like to turn the call over to our CFO, John Kullo.

Thank you, Shelly, good afternoon, everyone.

I will review the first quarter, provide some additional details on our efforts to control costs and also give an update on capital allocation. As a general overview, our results for the quarter came in as expected and on the better side of the guidance range we had provided last quarter. That said, seasonally lower volume and rate pressure coupled with inflationary cost headwinds more than offset our cost control and productivity improvements and weighed on margins versus the prior year period. Starting with first quarter results. On a consolidated GAAP basis, revenue declined 1%, operating income decreased 8% and diluted EPS decreased 4% compared to the prior year quarter.

The declines were primarily driven by lower yields and inflationary cost pressures across the business, with noticeable increases in insurance premiums for the third consecutive year. For the full year, we continue to expect our tax rate to to be between 2425% with the cadence throughout the year similar to what we reported last year. On the subject of cost, we have made progress to right size our cost structure across the business and this remains an area of focus. Over the past two years, we have reduced our people costs by over $200,000,000 through headcount attrition and performance management. That said, a portion of these savings have been offset by annual merit increases and higher benefit costs for our employees, particularly in the area of group medical costs.

While the economic backdrop remains unpredictable, we remain focused on being cost disciplined without disrupting valuable We aspects of our franchise like our strong culture, experience across the field and preparedness to meet future customer needs. Our leadership team is consistently reviewing the business with our customer needs and we will adapt to economic conditions as necessary. In addition to managing our people costs and reducing discretionary spending, we have and will remain focused on improving equipment utilization, network balance and efficiencies and reducing events to mitigate claims cost. I'll wrap up with some thoughts on our capital allocation and priorities. First, want to highlight that during the quarter we issued $750,000,000 of new senior notes, which extended the term on some of our debt that was maturing later this year.

For 2025, we are now expecting net capital expenditures to fall between 500,000,000 to $700,000,000 below our prior view of 700,000,000 to $900,000,000 Despite the continuation of a tough operating environment across the industry, we continue to operate from a position of financial strength with our leverage at target of one times trailing EBITDA. Since we have pre funded much of our future capacity needs, our capital needs are really for replacement and success based needs we have in our dedicated segment. We expect to generate strong cash flows and put that cash to work to generate the highest returns for our shareholders. During the first quarter, we repurchased $234,000,000 of stock and have $650,000,000 remaining on our current authorization. Now concludes my remarks and I'll turn it over to Spencer.

Thank you, John and good afternoon. I'll provide an update on our view of the market and some feedback we are hearing from our customers. During the quarter, overall customer demand trended in line with normal seasonality, giving consideration for an earlier Lunar New Year and the weather events that occurred in January and February. Demand for our intermodal service continued to be strong as our focus on operational excellence differentiates us from our competitors. This focus enabled us to safely execute and meet the expectations of our customers.

In our Brokerage and Truck segments, we saw some weather induced tightness. However, the truckload market loosened as the quarter progressed. This suggests truckload capacity continues to exceed demand. Regardless of market and macro changes, one thing is certain, we will continue to focus on providing the best service and value for our customers. And this focus has benefited us during bid season, affording us additional opportunities to grow with customers while also getting some rate improvement.

I'll close with some customer feedback. First, regarding service. Our customer sentiment is high, and we were honored with several awards during the quarter. Secondly, and not surprising, the uncertain macro environment and trade policy are top of mind for our customers. We recognize there are a lot of questions right now about how tariffs may impact the market.

We believe they have the potential to impact both supply and demand, but the magnitude and timing is difficult to predict. Our customers continue to plan for multiple what if scenarios, but most of them are waiting for the dust to settle to determine how tariffs might influence and change their short and long term business strategies. As part of this scenario planning process, some customers are considering ways to alter supply chain freight flows and or their country of origin sourcing, but these changes will be part of a much longer decision process. Regardless of the strategies they deploy, we believe we are executing from a position of strength. Across our suite of services, our brand has never been stronger.

We've made the investments to support our customers' business, take share in the market and make appropriate long term returns for our shareholders. I would now like to turn the call over to Nick.

Thanks, Spencer, and good afternoon. I'll provide an update on our areas of focus across our operations followed by a quick update on our highway and final mile businesses. I'll start with some comments on our safety performance. As Shelly mentioned, safety is a core to our company's culture and we are coming off of two straight years of record performance measured by DOT preventable accidents per million miles. I'm proud to say that through the first quarter, we have seen further improvement in our performance.

During the first quarter, we also achieved another big safety accomplishment that we're proud to share. Our maintenance team in Cedar Rapids, Iowa achieved 1,000,000 collective work hours without any injuries. This is an outstanding accomplishment that represents over nineteen years of dedication and attention to detail to ensure safe injury free operations. Shifting to the business, I'll start with Final Mile. Demand for big and bulky products remains muted with relatively weak demand for furniture, exercise equipment and appliances.

That said, demand in our fulfillment network was positive driven by off price retail trends. Going forward, our focus remains on providing the highest level of service with a strong focus on being safe and secure as we deliver products to and on behalf of our customers. Moving to JBT. Our focus is on methodically growing this business while remaining disciplined on maintaining balance in our network to drive the best utilization of our trailing assets. Bid season is always competitive and this year is no different, but we are relatively pleased with our success so far in terms of retaining business, getting some modest rate increases as well as winning new customers.

Our service levels remain strong and that has been noticed by our customers, which has resulted in additional bid opportunities compared to last year. Going forward, we like the progress and direction of the business and the improvements we continue to make, but meaningful improvement in our profitability will be driven by overall demand for truckload drop trailing solutions and our ability to fill excess capacity. I'll close with some comments on ICS. Our focus here remains on profitable growth, targeting the right customers where we can differentiate ourselves with service while also diversifying our customer base. Compared to the first quarter last year, we've seen more than a 20% increase in our customer count.

We're about a third of the way through the bid season and are pleased with our awards so far and have confidence that we will continue this momentum. Our gross margins performance held up well in the quarter as we managed our purchased transportation cost, which will remain a focus while also continuing to drive efficiency in and cost out of our operations. Going forward, we will remain focused on scaling into our investments with both new and existing customers while making improvements on our cost and our productivity. With that, I would like to turn the call over to Brad.

Thanks, Nick, and good afternoon. I'll provide an update on our dedicated results, review our pipeline and how we focus on operational excellence in our business. I'll start with the quarter. At a high level, the first quarter played out as expected despite the challenging operating environment. Weather did impact us slightly more than we'd consider normal, particularly in the Southeast, but we were able to recover some of that impact.

Additionally, we have not seen as much of a spring surge with our lawn and garden customers, which could be delayed as we experienced a sub seasonal lift from February into March across the portfolio. At this point, we think it's too early to tell if this is a seasonal shift or less inventory being pushed out to stores. Nonetheless, the team did a great job of managing our costs and resources to deliver value for our customers. Overall demand for our professional outsourced private fleet solutions has held up relatively well in the market. We sold approximately two sixty trucks of new deals during the first quarter.

As a reminder, our annual net sales target is 800 to 1,000 new trucks per year. While our pipeline remains strong, as we have said for several quarters, we have visibility to some fleet losses throughout the second quarter. Our value proposition to customers remains strong as the cost and complexity of managing and running your own private fleet continues to rise. As a reminder, we have a long contracting process that typically takes about eighteen months to close. Admittedly, we have seen some customers take a little longer to execute contracts as they are taking a more wait and see approach with some of the uncertainty in the market.

As is always the case, we remain disciplined on the type of deals we underwrite without sacrificing our return targets and would still say we are pleased with the activity and recent sales we've been able to close. We believe our performance in our dedicated business during the downturn has been a standout and highlights the strength and resiliency of our model. We have a diverse set of customers by both industry and geography with the average size of our deals remaining relatively small. With over 25% of our business serving food related industries, we also see consistency and stability across the portfolio. Our big focus right now, aside from our customer value delivery activities, is a strong focus on safety, which, as Nick mentioned, is core to our culture.

It is important to our drivers, the motoring public and also is our best risk and cost mitigator in the current environment. Going forward, we continue to expect to return to net fleet growth in 2025, but the timing of when deals sign and close will largely drive our ability to return to modestly positive revenue and operating income growth for 2025. We believe our differentiated model and the value proposition we offer customers is unique and are confident in our ability to compound our growth over many years to further penetrate our large addressable market. With that, I'd like to turn it over to Derre.

Thank you, Brad, and thank you to everyone for joining us this afternoon. I'll review the performance of the Intermodal business and give an update on the market and how we are focusing on operational excellence. I'll start with Intermodal's performance. Overall, demand for our Intermodal service was strong as we expected in the quarter. I am pleased to share we set a first quarter volume record, which comes on the heels of two consecutive all time volume records in the second half of last year.

Volumes in the quarter were up 8% year over year and by month were up 9% in January, up 6% in February and up 7% in March. As it pertains to mix, our TransCon volumes increased 4% during the quarter and Eastern volume grew 13%, our third consecutive quarter of positive Eastern network performance. We also saw very strong volumes in our Mexico business, a market in which we see significant opportunities in the future. I remain encouraged by our demand, particularly in the Eastern Network where we face the greatest competition from depressed truck rates. This is a testament to the strong service levels of the rails and how that translates into an attractive and valuable alternative to truck for our customers.

We came into bid season this year with a three pronged strategy, and I would say we are mildly pleased with our success so far. We know our margins need repair and rates will be a large driver of that, but the degree of rate repair will be somewhat market dependent. While we are still in bid season and have some large bids that will be awarded over the next couple of months, we have had only modest success in repairing rates while retaining existing business. Second, we were focused on achieving more network balance and winning the right freight for our network. This is an example of ways we can reduce cost and drive efficiencies by eliminating the costly movement of empty containers.

We have been more successful executing on this part of the strategy. Lastly, as in the case each year, we want to grow with new and existing customers while remaining disciplined with our rates. As a result, we have lost some business to other providers offering lower rates. But I believe we have still been successful in this third prong of our strategy to grow our overall portfolio. Our focus on operational excellence continues to be on delivering value to our customers and positioning the business for future growth at acceptable returns on our investment.

We remain focused on driving out waste and improving asset utilization by working to eliminate empty moves of our equipment. We also are strongly committed to further improving our safety performance to mitigate risks and costs associated with safety events. In closing, we remain confident in our intermodal franchise and the value we provide for our customers. We have the capacity and capability to grow into our investments while continuing to lead the industry in both margin performance and returns on capital. I'll now turn the call back over to the operator to give instructions for the Q and A portion.

We will now begin the question and answer session. And your first question today will come from Chris Wetherbee with Wells Fargo. Please go ahead.

Hey, great. Thanks. Good afternoon, guys. Maybe, Darren, we can just pick up on where we left off, I guess, in terms of intermodal bid season. So we're three months later than the last time we all talked about this.

I think at the time, you were maybe a little less confident or maybe didn't want to say that you'd get rate increases as we go through this year. It sounds like it still is a challenging environment, but maybe you're pleased by some of the progress. Do you think we get rate increases in intermodal in 2025 as you kind of complete the bid season over the next couple of months?

Okay. Appreciate the question, Chris. So we commented in those prepared comments about mildly pleased with our success in the bid season. And I think that's because we approach it really in three key areas. We want to fill some empty legs and fill up some costly empty moves.

And I do think we've been effective at that. We have achieved growth in our Eastern network, and we have absolutely had some wins in pricing. We've taken some losses in prices. So I want to be clear that I don't want to sound like we're getting rate increases across the board. I think we've been effective at communicating with our customers about the value we represent, And we have achieved some rate increases.

We've also lost some business due to disciplined price approach where, we asked for a price increase and the customer wasn't willing to give us. It is competitive, I will say that.

of sequential, just one quick follow-up just to make sure I'm understanding what you're saying. As you think about the environment, is it going to be more dictated by sort of mix of the business and that's what yields might be influenced by more so as we move forward? Just get a sense of how that plays out.

Yes. Clearly, growth of 13% in the Eastern network, while 4% in the TransCon is going to change some of the revenue per load modeling that you might see out there. And let's face it, Eastern network loads have shorter length of haul and are smaller revenue per load. That doesn't mean that they're the margin profile on those loads are worse or anything like that. So certainly, the mix of the business is going to be a little bit different than what we've seen recently.

And as we continue to grow in the East, that will be an influencer on our revenue per unit that you see in the quarterly results.

Great. Thank you for the time. Appreciate it.

And your next question today will come from Daniel Imbro with Stephens Inc. Please go ahead.

Yes. Good afternoon everybody. Thanks for taking our questions. Darren, maybe to follow-up on the intermodal side. I guess from a profitability or what is going well through bid season, it sounds like you are repairing the network.

You're successfully filling some of those empties. I guess how should we weigh the puts and takes, maybe an unfavorable mix, but more empties being filled as we think about the profitability standpoint from here? And then I guess with the uncertain macro and who knows what happens, I'd love to hear some commentary from what your

you guys thinking about managing your cost base as we move through the year, just given the uncertainty on demand and the visibility into volume due to 2Q, 3Q?

Okay. Let me start with the ability to fill empty legs and how you might think about that. I do I want to be clear. I think so far in mid season, we've been effective at that. I also know that historically, we have delivered we've communicated that 30% of our pricing implements each of the first three quarters and about 10% in the fourth quarter, and that's no different this year.

And so the impacts of the benefits of filling empty lanes probably weren't fully visible inside the first quarter, and we look forward to seeing those benefits as we move throughout the remainder of the year. I'm not sure I can follow what the other questions were.

Darrin. Daniel, thanks for the question. This is Spencer. Regarding what our customers are saying, I shared earlier that each one of them are going through scenario planning. And really, they've been doing that likely since maybe even ahead of the election.

And they've been implementing various strategies that you could really expect, whether it's pulling some stuff forward, pausing some shipments, possibly canceling a few and also changing really the origin of manufacturer. But one thing, I've had the opportunity to talk to several customers in the last few days, so has our team, and we support really a broad cross section of industries. And the thing that stands out in these conversations is they are resilient. They're finding ways to work through things as things change daily. And they're also thinking about long term plans and what they might need to look at.

And you can also think about my perspective and ours here. We view these as opportunities. We've been through this before. We've been through challenges before with our customers. And our value proposition stands out in times like this.

And so there might be a few things continuing to change until, like I said, the dust settles. But when that settles, it will create opportunities for us to grow with our customers and serve them with our broad suite of services. And I did mention, right now, we're executing with a position of strength. And as a commercial lead, that puts us in a great position to take care of our customers as they make changes today and over the long term. So appreciate that question.

And, Daniel, I'll try to take the last question, which is really around cost. If you think about how we came into this year, we established our budget really with an effort to grow, repair our margins. Everything we set out, we finished our first quarter with results that largely came in as expected and we're in a unique environment now because we've finished our record for our third quarter in a row record performance in intermodal with volume growth, our dedicated business that pipeline stays strong and we have customers asking us to grow in highways. But having said that, we recognize things are changing and that's changing by the day or the tweet or the moment. And so for us, we want to be fluid and we need to make sure that our plans align as conditions change.

So I talked about this in my opening remarks. We have to be focused on growing but our scenario planning really is a three pronged approach. What next steps can we make in cost management depending on which different scenario plays out? How do we think about our stock and our buyback strategy there and how we'd be prudent in capital spending. You heard John say that, our results and how much we bought back in stock, we reduced our CapEx guidance by $200,000,000 but our commitment is to strike the right balance between adjusting short term and that short term if that becomes longer term that changes our scenario planning.

But we're not going to jeopardize the value we can create over the long term. And I might just end with this, we have a seasoned executive team. Our average tenure at J. B. Hunt is twenty seven years.

We've been here before. We've been through ups and downs and every single one on this team are shareholders and are directly tied to our shareholders as well from a compensation perspective. And so when I think about the good and the bad times that we've been through, we know how to be nimble. And as we see more clarity on the environment, we're going to respond appropriately.

Yes. Really appreciate all the color. Best of luck, everybody.

And your next question today will come from Jordan Alliger with Goldman Sachs. Please go ahead.

Yes. Hi. I just wanted to circle back on tariffs and perhaps what you are seeing in terms of pull forward. There's been some thought that over the next ninety days with this pause, there'll be actually a step up in pull forward. And if so, what could that mean for the back half of this year from a volume growth perspective?

Will we move into a destock mode and year over year volume pressures in the back half? Realize things are fluid, but if you could maybe give some thoughts on that high level stuff would be great. Thank you.

Hey, Jordan, this is Spencer. Like I said earlier, each customer is in a unique spot. And they've done different strategies up to this point. And I think they're making changes, as Shelley even talked about, in a very fluid way and almost daily. One thing I do think as time goes on here, whatever the outcomes of these trade negotiations are, if it does go a little bit longer like we've seen, there might be some downs.

But when there are ups, it creates tremendous opportunity and could create challenges across our customers' supply chains that we can help them out with in really helping them to optimize their order shipments, their modes as well as their fleets. And one thing has been consistent though is in our customer conversations, they're always trying to drive towards reducing cost, finding efficiencies. And one of the top conversations we've had and are still having, it's almost, I think, we're having 100% of them, as an example of finding efficiencies is really mode conversion from the highway to intermodal. And I think that's the long term thought of our customers. They know things are still in a changing environment, and that's a great way for them to find the most efficient answer to move their supply chain.

So that's one of the things I think we'll see as things go on here. And until the negotiations are settled, we'll just move with that.

Jordan, let me jump in here. This is Darren. I just want to say on the pull forward discussion, look, we've said this now. This will be our third consecutive quarterly call where we quarter of couple

to transportation didn't know. I mean, that's all certainly possible and we don't want to be guessing at whether or not it was pull forward or not. There are a few conversations that clearly there have been some, but we're struggling to get direct customer feedback about that. Now we did see some pull forward out of Mexico for a short window of time last quarter. I think that was it's not a big impact to our volumes, but certainly want to acknowledge that, that has happened.

So again, we continue to look for feedback from our customers every single month, every single quarter about what's happening with their own demand. And again, everybody's remaining cautious with their feedback and they're trying to adapt their plans to the environment that they're in.

Your next question today will come from Brandon Oglenski with Barclays. Please go ahead.

Thank you for taking the question. Darren, I was wondering if you could follow-up on the commentary about some accounts going to other intermodal carriers on pricing. Is that reflected in the current run rate or the run rate that you saw in volumes in March? Or is that incremental to the outlook? And I guess more broadly, just what is it going to take to get to the right pricing outcomes in this market?

Well, certainly, we believe strongly in the service offering that we've really invested in and delivered on throughout last year and throughout the first quarter and have asked our customers to help us in with prices. And in some cases, the customers felt like maybe prices that they saw from competitors would give them the service and the quality of capacity that they needed. And we didn't feel like the alternative to the price we asked for was good enough for our returns and felt like we needed to be disciplined in that approach. And so yes, we did have some losses. I don't want to overplay the magnitude of that.

There's still a lot of the bid cycle to implement and there's really a lot of decisions from our customers we're still waiting on. And so I don't know what the run rate coming out of March was. We wouldn't typically provide that level of detail, and I don't feel like we can do that today. I don't even know that I know it exactly given challenges with volumes that just customers were doing a lot of different things at the end of last quarter, we got to wait and see kind of where that shakes out. But the disciplined approach to the price we ask for to get correct returns, particularly in the demand heavy headhaul markets, is an important part of our strategy.

And we've been successful with that in many, many cases. And there are some examples where we've learned.

Yes, Brandon, this is Brad. Just to follow-up on that, I think just to digest what Darren said, in headhaul markets where we see the greatest demand, that's probably the areas we're having the greatest success getting rates. I think it was important for us to share with you and other investors that there are in some instances situations where we're pushing rate hard enough to where we are walking away from some business. And that at least should be a testament to ourselves as well as to the market that we're willing to walk away from business that we don't think makes sense of the network.

And your next question today will come from John Chappell with Evercore ISI. Please go ahead.

Thank you. Good afternoon. Spencer, I think we've talked about uncertainty quite a bit at this point and no one really knows how things are going to transpire. It sounds like you have three different scenarios that you're looking at as an executive team. The NRF did come out with some pretty steep reductions on import numbers starting in May, '20 plus percent for several months.

So if that's one of the scenarios that you're potentially considering, how does J. B. Hunt manage your assets? And really kind of your price ask, if that's the type of outcome that we're looking for starting in a couple of months?

Well, think that research note that showed a pretty steep decline in demand, particularly from China is something that we've obviously considered, in terms of how we would manage the assets. And do we start I think part of your question is, are we going to start changing our pricing direction based on research like that? I don't believe that would be our strategy. And we can't chase business with price because of a fear that is really unknown now of such a sharp decline in imports. And the other elements there are, hey, some of these products are might be manufactured in Asia and maybe the consumer spends money on a product that came from somewhere else.

So we just we don't even know what volumes are going to produce as those changes really impact. And so I think that it's pretty fluid right now, and we're trying to adapt to the environment that we're in and feel like we will be effective with that.

And Darren, I might add, in some of the customer conversations that we've had, like I said, people were making changes even pre election, post election, post March 1 or pre March 1 and April. And that's still happening and several have been very aggressive in moving their country of origin sourcing already. And so to your point on that survey, I think that's one viewpoint of what could happen. But also, as Darren mentioned, there's lots of places that people are shifting things to make sure that they can serve really ultimately the American consumer and their customer and have product on the shelves and we're going to be in a position to move that.

Your next question today will come from Bascome Majors with Susquehanna. Please go ahead.

Thanks for taking my questions. Some of your largest customers are value focused retailers with significant China import exposure. I'm just curious, qualitatively, how have those bid conversations evolved in the last two weeks and not just specifically to pricing, though I would like to hear if that tenor has changed, but more broadly with issues of lanes involved or concerns about big compliance or a number of loads, understanding if there has been a shift in the back and forth in those large complicated bids for some of these customers? Thank you.

Yes. I might just talk about compliance through the quarter. Our compliance was strong. I think our customers one of the things that we said is they've returned to kind of normal seasonality and trends. That does allow them to forecast better and connect really their demand to their transportation needs.

And they've done a really nice job of that. And so I think our compliance so far has continued to improve really across all of our businesses, highway and intermodal. And then really what comes forward, we continue to talk with them and we're transparent about asking for forecast information. And right now, customers have not changed their forecasts with us regarding their demand trends.

And your next question today will come from Scott Group with Wolfe Research. Please go ahead.

Hey, thanks. Afternoon, guys. So just a follow-up just on the tariff piece. Maybe do you have any I know it will be an estimate, but any sort of rough estimate of what percent of intermodal at some point originates overseas and maybe what percent comes from China? That's just first part.

And then just secondly, any what's the plan in terms of what you're doing with capacity? I know there's we have a lot of record volume, but there still are a bunch of seemingly a bunch of containers not being utilized. Is there any thought of cutting capacity to manage the environment to start getting some better price and margin? Just thoughts on capacity. Thank you.

Well, let me start with your last question first there. Certainly, we don't necessarily think that reducing the amount of capacity we have is going to change the way we price. Now certainly putting it in storage and being prepared to come out of this kind of cycle with ample capacity for the long term, Again, those investments are really long term in nature. And so that's why that equipment exists. Yes, we have excess equipment today, and we have a lot of capacity to grow with our customers.

We're looking at options on what other ways can we use some of those assets in other parts of our business. That's certainly something that we're investigating. We don't have anything to say about that today, but we're looking at other ways to utilize the equipment. We've probably never given this data, but we can do that here today. I mean, call it, between 2030% of Intermodal's volume originates on the West Coast.

Now inside that, what percent of that originates in China? I don't know that we've ever done that study. And so I'm going to be hesitant to actually make a guess here. But certainly, the imports that originate in China and the ever changing environment that we're living in, we're just going to keep in close contact with our customers, with our rail providers and try to understand what's headed at the West Coast and make plans accordingly based on what we see.

And your next question today will come from Ken Hoexter with Bank of America. Please go ahead.

Hey, great. Good afternoon. So it sounds like it's not being driven by a pull forward in terms of these strong intermodal volumes, you're hitting record levels of volumes. So but you've got mid single digit margins now. So you're talking about losing some business on price.

J.B. Hunt Transport Services (JBHT) Q1 2025 Earnings Call Transcript

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