Brady Lierz

Brady Lierz asked about the continued strong sales in Dedicated Contract Services despite a challenging freight backdrop, seeking to understand the drivers behind these wins. He also questioned how much of the meaningful improvement in margins was due to cost-to-serve initiatives versus the maturation of earlier sales.

Answer

President of Dedicated Contract Services Brad Hicks attributed strong sales to J.B. Hunt's Customer Value Delivery (CVD) program, creative solutions, density, and leveraging resources. He stated that margin improvement stemmed from various initiatives, including maintenance teams lowering costs (uptime, program cost) and strong risk management due to rising insurance costs, emphasizing it was a combination of factors.

Brady Lierz inquired about the sustained strong sales in Dedicated Contract Services despite a challenging freight environment, asking what factors were driving these wins. He also sought clarification on how much of the segment's meaningful margin improvement was attributable to the 'cost to serve' initiative versus the maturation of previously secured sales.

Answer

President of Dedicated Contract Services Brad Hicks attributed the strong results to the team's execution, safety performance, and the company's Customer Value Delivery (CVD) program, which leverages density and shared resources for creative solutions. He also highlighted efforts by maintenance teams to lower costs and improve equipment uptime, along with effective risk management, as key drivers of margin improvement.

Brady Lierz, on behalf of Daniel Imbro at Stephens Inc., asked how Hub Group is balancing its increased $50 million cost savings target with the need to maintain flexibility for a market upturn. He also inquired about the Dedicated segment's performance and strategy, and requested monthly intermodal volumes for the quarter.

Answer

President & CEO Phillip Yeager explained that the cost savings target was raised due to identified efficiencies, such as warehouse consolidation, that do not hinder growth flexibility. He noted the Dedicated segment faced headwinds but has a strong service-based pipeline. CFO Kevin Beth added that investments in IT were maintained to drive efficiency. Mr. Yeager provided monthly intermodal volumes: April up 6%, May up 1%, June flat, and July month-to-date up 1%.

Brady Lierz, on for Daniel Imbro at Stephens Inc., asked about the potential for other regulatory shifts, such as automation, in light of rail merger discussions. He also inquired about the drivers behind the Transit segment's strong performance and its future margin potential.

Answer

CEO Rafael Santana stated that Wabtec anticipates the FRA will continue to focus on advancing rail safety and innovation, such as Trip Optimizer zero-to-zero. Regarding the Transit segment, he credited the team's significant steps to simplify its footprint and drive sustainable margin improvement, noting the business is committed to expanding margins beyond the mid-teens long-term.

Brady Lierz, sitting in for Daniel Imbro of Stephens Inc., asked about the potential for other regulatory shifts, such as automation or zero-to-zero initiatives, in light of potential rail mergers. He also inquired about the drivers behind the Transit segment's strong performance and its future margin potential.

Answer

CEO Rafael Santana highlighted progress with the FRA on technologies like Trip Optimizer zero-to-zero and expects a continued regulatory focus on safety and innovation. Regarding the Transit segment, he attributed its success to footprint simplification, portfolio optimization, and a selective approach to growth, stating the team is committed to expanding margins beyond the mid-teens.

Brady Lierz of Stephens Inc. asked for the primary drivers behind the strong Q1 EBIT outlook, clarification on sequential freight rate trends from Q4 to Q1, and an update on long-term capital allocation opportunities beyond share repurchases.

Answer

EVP and CFO Joel M. Wine explained that the 'meaningfully higher' Q1 outlook is driven primarily by elevated China freight rates compared to the prior year, with domestic and logistics performance remaining steady. Chairman and CEO Matthew Cox added that while rates stepped down from Q4 after the seasonal peak surcharge was removed, they remain strong. Regarding capital allocation, Joel M. Wine noted that while ocean transport M&A is unlikely, the company continues to evaluate niche, defensible M&A opportunities in the logistics space.