Intermodal markets: Competition holding pricing down

Hub Group managed through a tough quarter, taking a 10% hit to revenue compared to the first quarter of 2019. HUBG pivoted, only giving up 90 basis points of gross margin and cutting operating costs. Net income fell 44.6% to $13.2 million.

CEO David Yeager discussed intermodal market dynamics in detail, outlining his thoughts on the extreme pricing pressures faced by intermodal marketing companies and calling out some shipper behavior that indicates shippers expect truckload capacity to tighten significantly in the back half of this year.

In this week’s Intermodal Markets report, we weave Yeager’s commentary, which we found excellent, through our discussion of the relevant volume, pricing and capacity data.

We do want to highlight one data point that speaks to an ongoing theme in our intermodal reports. On the HUBG call, JP Morgan’s Brian Ossenbeck asked Yeager whether he thought the railroads’ service improvements were structural/PSR-related vs. volume-related.

“Honestly, I think a lot of it is operational and structural,” Yeager said. “I think that PSR, which I was always a little bit skeptical of, is working. I think it’s making the railroads more efficient.” 

We’ll have more on PSR later this week.

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