Hub Group Revenue Dips 5% on Weak Freight Demand
Subseasonal Shipping, Lower Fuel Revenue Weigh on Q3 Results
Key Takeaways:
- CEO Phil Yeager: "Strong West Coast shipping demand in September continued through October, and our customers are indicating that will be maintained into November."
- The Union Pacific-Norfolk Southern railroad merger is expected to drive opportunities.
- Yeager: “The recent addition of Marten Intermodal accelerates the momentum of our refrigerated intermodal business."
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experienced a decline in revenue driven by subseasonal demand and lower fuel revenue during the third quarter, the company reported Oct. 30.
The Oak Brook, Ill.-based intermodal and logistics service provider posted net income of $28.9 million, or 47 cents a diluted share, for the three months ending Sept. 30. That compared with $23.6 million, 39 cents, during the same time the previous year. The report adjusted this to $30 million, 49 cents, compared with $32 million, 52 cents, after certain pre-tax expenses.
Total consolidated revenue decreased 5% to $934 million from $987 million, driven by stable intermodal volume and higher intermodal revenue per unit being offset by lower dedicated and logistics revenue due to subseasonal demand and lower fuel revenue.
“International shipping volume was pulled forward in the third quarter, but we did not see that inventory materially begin to impact domestic shipping until following the Labor Day holiday,” Hub Group CEO Phil Yeager said during a call with investors. “This has led to a delayed West Coast peak season from what we originally anticipated. Strong West Coast shipping demand in September continued through October, and our customers are indicating that will be maintained into November, which is much closer to typical seasonality.”
The Federal Motor Carrier Safety Administration has proposed stricter compliance measures including more robust data monitoring and English-proficiency checks. Yeager expressed optimism that these stricter regulatory requirements will be a positive catalyst to balance the supply of capacity, leading to improving market conditions. The Union Pacific and Norfolk Southern merger also is expected to drive opportunities.
“These factors, along with our investments in our intermodal business and the prospects of a transcontinental rail merger, are creating a more positive framework for 2026 bid season and beyond,” Yeager said. “As we referenced in our call last quarter, we are excited about the opportunities that a potential merger between our primary rail partners presents to drive increased intermodal conversion in shorter-haul lanes while growing share gain opportunities.”
Hub Group also highlighted that purchased transportation and warehousing costs increased 8% to $684 million from the prior year. Salaries and benefits of $143 million were stable compared with the 2024 period. Depreciation and amortization decreased 3% to $31 million. Insurance and claims inched up 1% to $10 million due to safety performance and lower claims costs. General and administrative expenses decreased 9% due to cost-saving initiatives.
“The recent addition of Marten Intermodal accelerates the momentum of our refrigerated intermodal business, and our strong balance sheet and free cash flow generation provide significant capital flexibility,” Yeager said. “We remain focused on serving customers and realizing the intermodal growth potential for Hub Group in collaboration with our rail partners Union Pacific and Norfolk Southern. Hub Group is well positioned to deliver accelerating growth and further improvement in margin performance.”
Segment Breakdown
• Intermodal and Transportation Solutions: Revenue increased 0.4% to $561.5 million from $560 million during the same time last year. Prior-year intermodal revenue growth was largely offset by lower dedicated revenue. Operating income decreased 1.6% to $15.9 million from $16.1 million.
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• Logistics: Revenue decreased 12.7% to $402 million from $461 million last year. This was due to lower volume and revenue per load in the brokerage business, a decrease in customer activity for consolidation and fulfillment, and soft demand in managed transportation and final mile. Operating income decreased 3.9% to $23.6 million from $24.5 million.
Susquehanna International Group noted in a report that the company is exiting the year on solid ground. But the investment firm also warned that the company is entering next year facing uncertainty in intermodal and truckload in terms of contract pricing and tepid freight demand. It also is seeing upside risk from the merger of Union Pacific and Norfolk Southern.
“Despite a softer IM market and delayed ramp-up of new business in its Final Mile segment, HUBG held the low end of its FY25 EPS guide steady at $1.80, while lowering the top end to $2.05 from $1.90,” SIG analyst Bascome Majors wrote in the report. “This suggests stable near-term performance as management pointed to recent strength in volume growth through October.”
SIG anticipates peak season being a bit later than usual at this point, but typical transport seasonality and broader truckload and intermodal pricing risk are the only headwinds it sees the company facing over the next few quarters. It also noted the company is uniquely positioned as the only intermodal carrier aligned with UNP-NSC as its primary rail partners.
“We see this relationship beginning to benefit its top and bottom line into 2Q26,” Majors wrote. “Given the preliminary bid-season signals management has received from customers following the announcement of the UNP-NSC merger, which have been overwhelmingly positive, we continue to see a path to better days in 2026.”
Hub Group ranks No. 14 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 20 on the TT Top 100 logistics companies list.
