On Wednesday, JB Hunt Transport Servs (NASDAQ:JBHT) discussed second-quarter financial results during its earnings call. The full transcript is provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
The full earnings call is available at https://event.choruscall.com/mediaframe/webcast.html?webcastid=NryaNcrw
Summary
JB Hunt Transport Services reported a 19% increase in total revenue, a 32% improvement in operating income, and a 45% rise in diluted earnings per share compared to the previous year, highlighting strong financial performance.
The company continues to focus on disciplined growth through operational excellence, cost control, and leveraging investments in people, technology, and capacity to create sustainable competitive advantages.
JB Hunt has removed over $135 million in structural costs, improving productivity and customer experience, and remains committed to further efficiency gains.
Demand for intermodal services outperformed with a 10% year-over-year volume increase, setting a quarterly volume record, and the company sees significant opportunities for road-to-rail conversion, particularly in the eastern U.S.
The company expects continued strong demand in the second half of the year, with a focus on aligning with customers' capacity needs and maintaining transparent pricing discussions.
Management highlighted the tightening of truckload capacity due to regulatory enforcement and broader supply pressures, which is expected to benefit JB Hunt's intermodal and dedicated services.
The company has a record sales pipeline for its Dedicated Contract Services, driven by increased customer interest in dedicated solutions due to market conditions.
JB Hunt's strategic focus includes repairing margins, generating long-term shareholder returns, and maintaining a strong investment-grade balance sheet while being opportunistic with share repurchases.
Management expressed optimism about future pricing opportunities, particularly in the intermodal segment, as truckload rates rise and intermodal remains a cost-effective alternative.
Full Transcript
OPERATOR
Good afternoon and welcome to the JB Hunt Transport second quarter 2026 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a telephone keypad. To withdraw your question, please press star and then two.
Please note this event is being recorded. I would now like to turn the conference over to Andrew Hall, Senior Director of Finance. Please go ahead.
Andrew Hall, Senior Director of Finance
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 used to identify these forward-looking statements. These statements are based on JB 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 JB Hunt's Annual Report on Form 10-K 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, Brad Delko, Spencer Frazier, 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. Shelley Simpson, for some opening comments.
Shelley Simpson, President and CEO
Thank you, Andrew, and good afternoon. I want to start by thanking our employees across the organization for their hard work and relentless focus on serving our customers safely. We continue to operate in a dynamic environment that requires us to be nimble, make decisions quickly, and adapt as conditions change. Time and again, our people have demonstrated their ability to do exactly that while remaining operationally excellent. As we move through the year, we remain focused on executing against the priorities we outlined at the beginning of 2020.
First and foremost, that means driving disciplined growth through operational excellence. Customer conversations around pricing continue to evolve alongside a market that is changing rapidly. We are pushing where we can and where we need to. Second, we are leveraging the investments we have made in our people, technology, and capacity to create sustainable competitive advantages. While the market environment has improved, our focus on cost control has not changed.
We remain committed to removing structural costs from the business and improving the way we operate. That discipline is a critical component of our long-term strategy and positions us to perform well across market cycles. Third, we are focused on repairing margins and generating long-term shareholder returns. We have made meaningful progress repairing margins and while further opportunity remains, we are encouraged by the trajectory of the business.
We continue to have transparent conversations with customers about the investments required to maintain the service capacity and innovation that supports their growth while producing appropriate returns for our shareholders. It is increasingly clear that the freight market has changed, capacity has tightened across the industry, and safety-focused enforcement and broader supply pressures continue to affect available truckload capacity. We saw that tightening build throughout the quarter, including a noticeable step change around the annual road check event in early May that has persisted.
While demand is improving gradually, the current market tightness is being driven primarily by supply conditions. We didn't spend the last four years waiting for the cycle to turn; we spent the last four years preparing for it. In this environment, I am confident in our strategy that has enabled us to gain market share. The foundation we built over our history, our commitment to people, technology, and capacity, being a leader in safety, performance, consistent operational excellence, and delivering value to our customers through our CBD process has positioned us to succeed today and to deliver even stronger results in the future.
We have structurally lowered our cost to serve customers, creating additional growth opportunities while driving progress towards our margin goals. Even without a material benefit from pricing, the financial leverage in our business model continues to improve through disciplined growth and the application of technology across the enterprise. All of this positions our company to compound growth recycles. Looking ahead, I'm excited about the opportunities in front of us during the second half of the year.
We expect demand for our services to remain strong and remain closely aligned with our customers on their capacity needs. We have proven that our model works and that our service delivers value. We remain focused on ensuring that we receive the appropriate return for the value we provide while continuing to create disciplined sustainable growth and long-term value for our shareholders. With that, I'll turn the call over to Brad.
Brad Delko, CFO
Thanks, Shelly, and good afternoon. I'll start with some quick comments about our financial performance in the quarter. As you've seen in our release, on a GAAP basis, total revenue increased 19%, operating income improved 32%, and diluted earnings per share improved 45% compared to the prior year period. These results reflect disciplined execution and continued momentum from the strategy we've been discussing for several quarters around operational excellence and lowering our cost to serve.
While market conditions have improved, the biggest driver of our performance continues to be our people executing at a high level on service, safety, productivity, and cost discipline while leveraging our technology investments. As demonstrated this quarter, our cost discipline performance wasn't at the expense of supporting future growth as we achieved double-digit volume growth across JBI, ICS, and JBT in the quarter. The investments we have made over the past several years in our people, technology, and capacity are creating meaningful advantages for our business and allowing us to respond quickly to opportunities in the market.
Let me turn to our efforts on lowering our cost to serve. While market fundamentals have shifted, this remains one of the most important operational initiatives underway across the company. Over the past year, we've removed over 135 million structural costs from our company and we continue to look for opportunities to simplify processes, improve productivity, increase asset utilization, and leverage technology to automate work. Just as importantly, these efforts are improving the customer experience while creating operating leverage across the organization.
Our objective remains the same as it has been since the beginning of this initiative: build a stronger, more efficient company that can generate higher returns across all market environments. We are encouraged by the progress we are making and believe there remains additional runway ahead as we continue to scale our technology investments and improve efficiencies across our scroll of services. Turning to Capital Allocation, our approach remains consistent.
We are a disciplined growth company and we are equally disciplined in how we deploy capital. Our first priority continues to be investing in the business where we see opportunities to generate attractive long-term returns. We remain committed to maintaining a strong investment-grade balance sheet, supporting the growth of our dividend, and being opportunistic with share repurchases when appropriate. We believe the investments we have made throughout this cycle have positioned the company exceptionally well for future growth.
Importantly, much of our capacity has already been funded, providing us with significant flexibility as demand for our services improves. The combination of a strong balance sheet, healthy cash generation, and disciplined capital deployment gives us confidence in our ability to continue creating long-term shareholder value. That concludes my comments. I'll now turn it over to Spencer.
Spencer Frazier, EVP of Sales and Marketing
Thank you, Brad, and thanks to everyone for joining the call. I'll start by saying how proud I am of our team's performance this quarter. In a rapidly changing environment, our people stayed focused on what we could control: serving customers, managing through volatility, and helping them make the best decisions across their transportation networks. During the quarter, we saw an acceleration of the structural changes in the market that we discussed in April.
Truckload capacity continued to tighten from ongoing regulatory enforcement, while at the same time many carriers continued to face higher operating costs that are not fully supported by prevailing rates. As a result, several industry indicators, including higher tender rejections, higher spot pricing, and lower driver employment, moved towards levels not seen since 2021 and 2022. The pace of change has created real planning and execution challenges for our customers.
Many shippers were not positioned for the speed and magnitude of these shifts and they are now looking to the best providers who can help them build more durable and flexible plans around capacity, cost, service, and mode. In the second quarter, overall freight demand improved modestly from the first quarter, demand in many industrial markets is improving, and US consumer demand remains resilient. That said, demand for JB Hunt's suite of services continues to outpace the market.
Supported by record volumes in JVI and double-digit volume growth in both JBT and ICS, we gained market share across our services, retention remains strong, and our pipelines in all business units continue to expand. As demand improved and capacity tightened, pricing and planning conversations with customers became more transparent, more frequent, and more flexible. We saw customers initiate more out-of-cycle mini-bids as they worked to keep pricing aligned with the rising cost of capacity.
Customers are also becoming increasingly mindful of the carriers they rely on, consolidating more of their business with providers that can deliver capacity at scale. This is where our mode-neutral business model and our continued investments in people, technology, and capacity create meaningful value. We are positioned to help customers optimize across orders, shipments, and modes and to provide practical solutions as their networks adjust during the quarter.
The strongest areas of customer engagement centered on highway to intermodal conversion, dedicated fleets, and access to safe, secure, and reliable capacity. Looking ahead, we are actively helping customers prepare for fall peak, reset capacity assumptions, and begin transportation planning for 2027. While many customers did not plan for this level of change to occur this quickly, external customer surveys and our ongoing customer conversations show a growing recognition that it is becoming more expensive to support the capacity, service, and professional driving jobs that power our nation's supply chains.
We believe that reality will shape future supply chain planning and budgeting discussions and it reinforces the role JB Hunt will play in helping lead customers through a very dynamic operating environment. With that, I'll turn the call over to Nick.
Nick Hobbs, Chief Operating Officer
Thanks, Spencer, and good afternoon. I'll share updates on our final mile and highway businesses, but first, as we do at internal meetings, I'll start with an update on safety. Safety is core to our culture at JB Hunt, and we continue to challenge ourselves to improve on our record safety performance as measured by DOT preventable accidents per million miles. I'm proud that year to date through the second quarter, we are besting last year's results by 11%.
To support our current and future growth, we will bring on drivers to maintain our high service levels to our customers. As the driver market has tightened, we have implemented various strategies to recruit and retain drivers. To meet our growing need, we have implemented sign-on bonuses in several markets and targeted driver wage increases in select markets. While these are important early actions, we believe the industry will need to continue investing in professional drivers who operate safely and comply with regulations designed to protect both themselves and the motoring public.
Moving to Final Mile, demand remains stable across our core end markets of furniture, exercise equipment, and appliances. Demand in our fulfillment business remains strong, driven by off-price retail channels. Our sales pipeline remains healthy, and we are adding new opportunities as we work to offset as much of our previously disclosed $90 million revenue headwind. Due to our focus on being disciplined, we remain committed to being safe and secure and providing customers with the high service levels that they have come to expect from JB Hunt.
In JBT, our focus on operational excellence continues to drive growth and market share gains, highlighted by our fifth consecutive quarter of double-digit volume growth. As we discussed last quarter, the top truckload market remains challenging for independent contractors, leading us to rely more heavily on third-party capacity at current market spot rates. During the quarter, our revenue increased 35% with low growth of 14%, but our gross profit dollars declined 12%, primarily due to higher purchase transportation rates. While we are seeing spot market opportunities in ICS to help offset some margin pressure, we don't have the same degree of opportunity within our trailer network business.
Given the pace of market change, pricing implemented just a few months ago is no longer sufficient. Going forward, we remain disciplined in taking appropriate risk and are working with customers to better align rates with current market conditions and the value we provide. I'll close with ICS. The positive momentum we have felt in our business is beginning to translate to improved financial performance. We have been successful in bid season, winning more volume and securing double-digit rate increases while gross margin remains under pressure.
Compared to last year, they improved sequentially from the first quarter, supported by increased spot and mini-bid opportunities and contractual freight repriced closer to current market conditions. The market remains dynamic, and going forward, our focus remains on leveraging our cost as volume scales through the platform and generating more gross profit dollars. While encouraged by the second quarter results, we remain focused on building sustained momentum.
With that, I'd now like to turn the call over to Brad.
Brad Hicks, EVP & President of Dedicated Contract Services
Thanks, Nick, and good afternoon, everybody. I'll provide an update on our Dedicated Business. Starting with the quarter, our second quarter results once again highlight the strength of our dedicated business. Despite a slow start due to weather, demand in the lawn and garden category improved, and demand across our other end markets performed as expected. The second quarter also delivered another record safety performance for DCS. As our team's commitment to safety and operational excellence continues to lower our cost to serve and deliver greater value for our customers, it's worth reminding everyone that while fuel is primarily a pass-through in our business, it is dilutive to operating income margin percentage. In the second quarter, we estimate that fuel was close to a 100 basis point headwind to operating margin percentage compared with the prior year quarter. During the second quarter, we sold approximately 250 trucks and remain confident we will achieve our full-year target for gross truck sales of 1,000-1,200 new trucks. Our sales pipeline remains robust and has strengthened over the past few months as the tightening truckload market has driven increased customer interest in a dedicated solution.
In fact, our pipeline is currently at a record level in terms of the number of trucks, which is a testament to the strength of our dedicated business and the value we consistently deliver for our customers. Even with more opportunities in the pipeline, we have not altered our pricing or return discipline to chase growth. We have a proven track record of value creation through our customer value delivery platform, and with our scale and density, we believe we can offer differentiated solutions to customers in the market.
Last quarter, I outlined our expectation that we would return to fleet growth this year while achieving only modest operating income growth for 2026. On the fleet side, we need to see a wave of new truck growth for a few months before that growth translates into improved profitability. Given the expenses associated with starting up an account, I remain confident that this wave of growth is coming. However, we remain unwilling to sacrifice our discipline around margins and returns, particularly at this point in the cycle, simply to accelerate growth. Doing so would add risk and variability to our dedicated business, which has proven resilient throughout cycles. In fact, our win rate on new deals remains consistent with historic levels. While dedicated has historically been the last part of our business to see an inflection from a change in the freight cycle, and that will likely be true again in this cycle, I remain confident in our business and the growth opportunities ahead of us.
We have a large, untapped, addressable market to grow into and a proven track record of disciplined financial and operational performance. I remain proud of our entire team's efforts, the great work of our professional drivers, and the value we create for our customers. With that, I'll turn it over to Derek.
Derek Leathers, EVP of Highway Services
Thank you, Brad, and thank you, everyone, for joining us this afternoon. The consistent execution of our strategy over the past several years has positioned us well to capture market share gains in the current environment. Service levels remain strong, and we have available capacity to support customer growth at a time when Intermodal's value proposition is the strongest it has been in more than a decade. During the second quarter, demand for our Intermodal service outperformed normal seasonality for the third consecutive quarter, and we also set a quarterly volume record with over 578,000 loads for the quarter.
Volumes were up 10% year over year, the first double-digit volume growth quarter in over a decade. On a monthly basis, volumes were up 9% in April, up 9% in May, and up 12% in June. Transcon volume grew 5%, while our eastern volume increased 16%. Our eastern growth comped against a plus 15% performance in the prior year, or set differently, up 31% on a two-year stacked basis. We continue to see significant road-to-rail conversion opportunities in the east, particularly as rising truckload rates, fuel prices, and tightening truckload capacity make Intermodal an increasingly attractive solution for shippers.
While we have available container capacity to grow with our customers, we remain disciplined to ensure the growth is sustainable over the long term and at acceptable returns for the value we create. The rail network is experiencing quality growth, and we remain actively engaged with our rail providers on resource planning to support both current and future growth. While rail service has moderated slightly as volumes accelerated, conversion activity is at levels we have not seen in more than a decade.
We remain confident in our rail providers' commitment to service and our collective ability to support higher volume levels while maintaining dependable and reliable performance. The same supply challenges affecting truckload capacity are impacting the drayage market, where driver availability remains tight, and we are working diligently to attract quality drivers to support our growth. In this environment, our in-source drayage strategy is a meaningful competitive advantage.
By owning our tractors, containers, and chassis and utilizing primarily company drivers, we maintain greater control of the customer experience while reducing reliance on more costly and less reliable third-party drayage capacity. We previously outlined a path to the low end of our long-term margin range through contributions from cost, volume, and price. We have done great work on lowering our cost to serve and believe we have achieved the point of margin from cost on volume.
The growth has materialized while remaining disciplined to attract the right freight that adds balance and connectivity across the network. So I would say we are pretty much there with the point from volume. The opportunity that is still in front of us is price. As you all know, our intermodal bid season begins each year in October and finalizes in Q3, so we're nearing completion of the 2026 bid season. In the first half of this year's bids, the operating environment at that time didn't present the same pricing opportunities that the current environment has.
Historically, intermodal contract pricing has lagged truckload pricing, and we continue to believe that to be the case moving forward. However, given the pace of change in the truckload market, we are increasingly encouraged by the pricing opportunity heading into the 2027 bid season than we were even a couple of months ago. Encouragingly, our improved financial performance over the last several quarters is unrelated to any material contributions from price to cover inflation.
While in prior cycles we would typically see our financial performance lag other transportation modes, we feel like we've led the broader industry as this cycle ensues. With that, I'd like to turn it back over to the operator to open the call for questions.
OPERATOR
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. The first question will come from Bascom Majors with Stevens. Please go ahead.
Bascom Majors, Analyst at Stevens
Thanks for taking my questions. Hey, Brad, Darren, following up on sort of how you ended that on the pricing discussion and the optimism going forward, can we talk through how prevalent the multi-year price agreements are with intermodal customers today compared to prior cycles and how much visibility did these commitments give you into the contract rate renewal plan into 2027 and even beyond? And just beyond the renewals, taking a step back beyond our past core pricing, you know, what opportunities does Hunt have to increase intermodal revenue per load over the next few quarters that might not show up in a renewal number but could still meaningfully impact the business?
Darren Field (President of Intermodal)
On the multi-year conversation, certainly we have customers that we have engaged with in multi-year programs. I don't know that we've ever talked about the percentage of our business that entails, and so I'm not ready to highlight that specifically. But we're aware of customers' value to our network and maybe areas that we can work with those customers specifically related to cost around serving their business. And so the behavior of our multi-year business is typically a little bit different than the constant change that we may face with customers that aren't engaged in multi-year agreements.
Look, the environment we're in today does present new opportunities for us. I think that the number of mini bids or the number of times customers are reaching out to us looking for an answer, I don't remember it ever being any stronger than it is right now. We have tremendous numbers of opportunities to talk to our customers about new opportunities. Not every single one of those opportunities is going to drive intermodal volume. It's coming in the door for JB Hunt's total book of solutions.
And so we're constantly looking for that opportunity. I do think new business pricing has contributed to benefits in our network, and I fully expect that will continue through the remainder of this year and deep into next year's bid cycle. I know Spencer may also want to comment on this.
Spencer Frazier, EVP of Sales and Marketing
Yeah, hey Bascom, thanks for the question and Darren, I'll kind of start where you left off really around mini bids. I think the frequency of bids has definitely increased. You said extraordinary. It was actually a record in the quarter, the number of opportunities, and that comes across bids, proposals as well as reviews. The main point on mini bids I'd like to say is I'd almost like to get rid of the mini bid term. They are structurally larger bids as customers are competing for capacity to reset their networks.
Our customers are still having significant challenges across their routing guides, and that gives again all of our services opportunities to step up and be the go-to for them and create opportunities again to hopefully get the right returns that we need on all of our businesses. So we look forward to continuing those conversations and working through and setting our customers up with capacity plans that they can count on.
OPERATOR
The next question will come from Chris Weatherby with Wells Fargo. Please go ahead.
Chris Weatherby, Analyst at Wells Fargo
Hey Chris. Hey Brad. Good afternoon guys. I guess maybe just picking up on that point, Spencer, you're talking about mini bids. I guess we understand sort of how the bid cycle works and kind of what's locked in and what needs to wait a bit. But I guess how do you think about the back half from sort of a realized yield on the intermodal side with the combination of mini bids and then maybe a little bit of an opportunity around peak season because we have seen some announcements from other folks about peak season surcharges so maybe you're sort of wrapping that all in and maybe how we can think about the second half if there is going to be any change and what maybe we could see.
Spencer Frazier, EVP of Sales and Marketing
Yeah, Chris, thanks for the question too. I'll let Darren talk about yields and things like that. I think he's got a good answer for you there. But regarding peak season, I will talk about that. You know, we do engage in peak season planning conversations at the end of the peak season of the prior year. So we've been at peak discussions since the end of 25. We do have peak agreements with our customers today that have proactively planned for the 2026 season.
And then we're in discussions right now trying to get forecasts with our customers and setting up really our plan and sharing with them the cost to serve and execute peak. So as far as that goes, I would say that peak from my perspective is going to be similar in timing and shape. You know, the import peak that talks about coming in early, that can happen early, a little bit later. But really the lag, there's always a lag from the import peak to the execution of the domestic peak because that domestic peak is really matched to meet their consumer demand.
And so that's why I say the timing and the shape we expect to be similar. And we continue to have ongoing discussions to make sure we're set up for success with our customers.
Darren Field (President of Intermodal)
Yeah, Chris, let me just jump in. It's Darren again. I'll jump in on pricing change and magnitude. Look, we're not going to, I don't have a forecast number for you or any kind of guidance. What I'll tell you is our Eastern Network business behaves and trends, you know, tracks against highway competition and we have massive opportunities coming in the door. Spencer just highlighted that we're setting records with the opportunities that we see. The gap between the highway rates and intermodal rates has grown in this cycle and we have long times, for a long time we've said somewhere between 10 and 15% discount fuel inclusive in the Eastern Network is and has been sustainable for intermodal. And we have a larger gap in the price today largely because of rates that are now 6, 7, 8, 10 months old.
So as we go through the rest of the year and bring on new business, we anticipate certainly closing that gap. I don't know what magnitude that presents in terms of the mix of the rate, how you model that. Just know that certainly the opportunity to improve pricing. Now we're also faced with inflationary pressures. Driver wage cost is going to move up, the cost of labor is going to move up. Our rail providers are all going to be talking to us about cost challenges they're facing. And so we're, we're looking for pricing to recover against inflation while also improving our margin a little bit. So certainly as the rest of the year goes on and as we move into the next bid season, we will look for that gap from intermodal to truckload to close.
OPERATOR
The next question will come from John Chappell with Evercore. Isi, please go ahead.
John Chappell, Analyst at Evercore
Thank you, Darren. On the volume side, the acceleration from April through June and then we look at 2H25 or even if you wanted to your stack it, it feels like it's an easier comp. So when you take that June number of 12%, look at potentially easier comps, the backdrop that you just laid out as it related to capacity rail service, the spread, is that a number now for volume in the second half of the year, that continues to build off of that 12% and if not, what kind of derails that, no pun intended. Is that a guidance question? No, no, no, there's a. It's a cadence question.
Darren Field (President of Intermodal)
Listen, I think the demand for our services is extraordinarily strong. What you heard in some of the prepared comments is a lot of focus on disciplined growth. There were opportunities in the second quarter for even more volume that wasn't going to be sticky or might have contributed to even worse cost challenges for us. So we're being careful in ensuring that intermodal is the correct long-term answer for volume to onboard and convert from the highway.
And I would anticipate that opportunity will continue. We're also careful with our own capacity challenges. We need to hire more drivers, we need to onboard more drayage capacity today. So that can be a bit of a headwind for us. But, but we're, but I'm confident in JB Hunt's ability to go out and attract and retain and bring on drivers for our needs as the rest of the year goes on. I don't know how to give you a forecast of percentage change, but I know that demand is really strong for what we're doing.
OPERATOR
The next question will come from Tom Wadowicz with UBS. Please go ahead.
Tom Wadowicz, Analyst at UBS
Hey Tom. Yeah, hey, good afternoon and you know, congratulations on the strong growth and execution on the plan. Wanted to get a sense related to intermodal margin of just where you're at on drayage productivity and also I guess just rising utilization of containers. It seems like you probably had a period where productivity was below normal, maybe against a weaker freight backdrop and say 23, 24. And then I think for I'm not sure how long, maybe the past year you've had some nice improvement in that productivity, which I think has helped.
Just where are you at on like you know, loads for dray truck and you know, container utilization. Is that, can that go up further and help your margin and intermodal or is that kind of peaked out and you can't, you know, squeeze out more there?
Darren Field (President of Intermodal)
Sure. So on productivity around the assets and our people, our driver productivity as well as our tractor productivity has been extremely strong and clearly we've, we didn't pre-fund capacity on the tractor front or the driver front like we have containers. So we do have excess containers still and there are thousands of loads for us to go grow into that capacity. So certainly volume growth in intermodal will continue to help spread fixed cost out over the system and, and continue to unlock margin improvement.
I don't want to lean into driver productivity and tractor productivity on the dray front as being a major contributor to margin expansion. I think over the last 12 months we really, really did a great job as an organization and the team was very successful in finding productivity benefits and that is part of our cost to serve initiatives that we announced a year ago. And so we've, we've been successful there. But I don't, I don't, I will always put some pressure on that team for productivity improvement but I'm not looking for that area to really unlock margin expansion on the container front.
Certainly getting back to call it 2018 type container terms is certainly where we would anticipate to move. And over the last year or two, seeing that improvement while we stopped buying containers was one of the ways that has really helped out while we continue to grow into it.
OPERATOR
The next question will come from Jason Seidel with TD Cowan. Please go ahead.
Jason Seidel, Analyst at TD Cowan
Hey guys, how are you doing? Impressive quarter. Wanted to ask you, have you seen any impacts from at least early on from the Montgomery decision, both looking at ICS as well as the asset-based side and then if you haven't seen it thus far, what are you expecting down the road from both a capacity as well as an insurance cost standpoint?
Nick Hobbs, Chief Operating Officer
Yeah, I would just say this is Nick, so I'll jump in on that. I would say that we've seen more carriers come to our platform and more carriers getting approved. So I think we have seen carriers migrating from small brokers. Is our speculation on that trying to go to higher ground? Plus we have a lot of freight as we've talked about, our volumes are way up. So I think we have a lot of opportunity. But from our standpoint, the Montgomery decision, it's just increased a lot of focus in the carrier selection and broker responsibility.
But we already exceeded the federal minimums and we have dynamic monitoring going on. So no risk exposure increase there for us because we think we've been doing a really, really good job for many years with our safety focus. But we think we have seen more carriers migrate over to our platform because of that.
Brad Hicks, EVP & President of Dedicated Contract Services
I might just add too. This is Brad Hicks from a dedicated standpoint. You know, in my prepared remarks I talked about record pipeline. How much of that is directly related to the outcome of that ruling? It's hard to say. But I certainly think that along with the other regulatory enforcement and the pressure on drivers, I do think there are examples where shippers want to ensure that they are partnered with the right reliable supply chain partner.
And I do think that's a factor. It's really hard to pinpoint to what extent but, but I do think that that is showing up to some degree.
Jason Shelley
And Jason Shelley, I would just add that in the driver market there are specific markets that are as tight as we have ever seen. And so you're facing several markets where you're hearing customers come to us, but also really an advantage for us being on the asset side thinking about how we attract, recruit and retain the best drivers. And so it is a challenge in the market, but I think it's a welcome challenge for us.
OPERATOR
The next question will come from Brian Ossenbeck with JP Morgan. Please go ahead.
Brian Ossenbeck, Analyst at JP Morgan
Hey Brian. Hey afternoon everybody. Maybe just two follow up questions on capacity. Shelley mentioned some of the markets are really tight in terms of the driver size tight he's ever seen. Darren Dezet, is that a cause for concern on the trade side? I know you have a lot in house, so everybody else probably feels it more than more than you would. But is that something where if you're already kind of at the top end of productivity, maybe that becomes a little bit more of a challenge.
And then if you can just talk through a little bit more about the pulling back some of the containers off of the stacks because I know you're over about 90% right now for the first time in a while. So really peak season discussions are already underway. What are you thinking about managing that stack and maybe bringing some of that more to the market? Thanks very much.
Darren Field (President of Intermodal)
Well, certainly anytime there's challenge with the driver supply, all parts of the supply chain that hire professional truck drivers are going to face some amount of challenge. I think the third party drayage capacity out there has been under some pressure and so I do think we have an advantage against our competition given the amount of in source, the amount of company drivers we use. We, we do partner with outside carriers though, and, and have had a lot of success for a number of years to do that.
And that will remain an important part of our strategy. But as, as we see specific markets that are most challenged, we feel that as well. And it just sends customers looking for an intermodal conversion opportunity from the highway that much faster in those markets. And so it just kind of contributes to even more pressure in those markets where we're trying to onboard and hire and grow our driver base so that we can grow with customers and we'll continue to work on that.
As far as the container supply, you know, we don't obviously we manage forecasts with customers, we manage expectations. We have a network plan around our volumes. And as we see new opportunities come at us, we're going to look for how much capacity do we need to bring out of storage. That's been an ongoing process for us for well over a decade now. It's just been more visible with the amount of equipment we've had in storage over the last few years.
So I don't think that our behavior around when to bring containers into the market is any different today than it ever has been, but certainly can understand and appreciate the question.
Shelley Simpson, President and CEO
Right. I would say in intermodal it's a strategic advantage for us. And so if you just think about what the market looks like today, it is very, very tight markets. Our customers are coming to us and that's a direct correlation to the service that they're receiving. In the intermodal market, we continue to have strong service performance. I believe that's the operational excellence that's happening inside our intermodal business and that includes how much that we actually insource with our own professional drivers.
OPERATOR
The next question will come from Jacob Lacks with Wolff Research. Please go ahead.
Jacob Lacks, Analyst at Wolff Research
Hey. Afternoon. Thanks. Hey. Hey. Thanks for your time. Maybe just to follow up on that, how much capacity for incremental growth do you think you have today within Intermodal? And how do you think about balancing volumes versus pricing going forward? And then is the competitive backdrop in transcon improving at all?
Darren Field (President of Intermodal)
So first of all, on, on, on the volume front, how much excess capacity? I, I don't know. We, we, we, we've got, I think for the last couple of years we've said we've had over 20% available capacity for growth and then we grew 10. Grew 10. So good point. Let's settle on 10. And as it relates to the comparison of price versus volume, look, we're, we're in this business and own these assets to, to generate a return on those investments. And so we certainly balance our pricing opportunity, the volume growth opportunity around how it can contribute to our network and add value and expand our margin.
And those decisions are going on every day with the opportunities and will continue to, to come through the door like that. I think in the transcon competitive space I do think it has behaved a little bit different than normal and would have expected a little bit more pricing strength there than what we've seen that has just shown up, you know, a lot of rail owned competitor, rail owned asset based. The rail control competition that we face has been a little more aggressive than what we've seen in the past.
And so there's times when we've been able to use our service quality and our ability to provide benefits to our network to defend that, to win more, to grow. You know, we're not losing share in transcon, but it has been a little bit more difficult pricing environment there. Our prices are improving. I want to make sure everyone hears that our prices are up year over year in the transcon. It's just that the truckload capacity market is not as big of an influencer on that market as it is in the East.
OPERATOR
The next question will come from Ken Hexter with Bank of America. Please go ahead.
Ken Hexter, Analyst at Bank of America
Hey, great. Good afternoon and nice job on handling the double digit intermodal load growth into flowing into results. Brad or Darren, if utilization up to 90% and you've got 10% excess capacity, where does utilization get to before you start buying equipment? And can you detail a bit more on the rail service level comments that you made? Are you concerned this is a cap on your growth rates near term? Is there any particular region or market feeling more painful?
Thanks guys.
Brad Hicks, EVP & President of Dedicated Contract Services
Yeah Ken, let me start with maybe not necessarily correcting my statement, but I think just going back in history and saying hey, we have 20% capacity and the simple math of saying we grew 10 would suggest 10. I think there's still opportunities particularly and I'll let Darren support this comment. When we're growing in the east, we have opportunities to turn those boxes faster. And so a load isn't necessarily a load in every instance. And so with the growth we're seeing in the East, I think there would be opportunities for us to turn this equipment faster.
I don't recall there ever really being a time when we put out an earnings report and you see a length of haul, an intermodal below 1600 miles. I think we've had two consecutive quarters of that and so, you know, the 31% 2 year stack growth in the east, if that trend continues, there's probably opportunity to get more productivity on that container. And so let's not just get too set in viewing that we only have 10% capacity and then Darren, I'll let you take over from there.
Darren Field (President of Intermodal)
Well, I think on the rail capacity front, look, when you start throwing the amount of growth that has come at those teams in pretty short order, everybody needs a minute to sort of build their plan, understand their resource planning. I'm not at all concerned about rail service moving forward and especially just the commitment to growth capacity and having the people available for our rail providers to operate. And that's universal amongst all of our rail providers.
Everyone is very focused on maintaining the right levels of their headcount and their equipment and just all of their ability to do that. So will there be blips along the way if growth shows up unexpected or if we and our customers are unable to forecast it and communicate what's coming? That's what makes me concerned. So I think we're doing a really good job of highlighting information we need and the ability to forecast how much volume is going to come at us and how do we communicate that with our rail providers.
And everybody is very receptive and the teams have never worked more closely than they are today in preparing for this growth.
Brad Hicks, EVP & President of Dedicated Contract Services
Hey, Ken. And just to add, we are going to challenge ourselves on our turns on our boxes. If you think about a market that we have entered, you do get the opportunity to think about the type of freight that you move and how efficient is the freight that you move. And so we'll have an opportunity to really get more efficient on our current boxes. And then we still have several thousand or thousands that are still available and ready for growth. So between those two, we will not put in capital plans until we get confident what our turns can move up to with our base leapers.
OPERATOR
The next question will come from Richa Harnain with Deutsche Bank. Please go ahead.
Richa Harnain, Analyst at Deutsche Bank
Hey Richa. Thanks team. Hi. I guess just zooming in on some things. First, Darren, I think you said pricing was positive in transcon, so the intermodal pricing that we saw reported Ex fuel going positive for the first time since 2022. That's not just driven by mix, right? It's driven by some real same store pricing growth. I wanted to clarify that. And then regarding a little more than normal transcon competition, it's encouraging to hear you're still able to defend share in the market despite that. But we're just trying to understand if there's anything changing that would prohibit Intermodal's ability to narrow its gap to TL rates over the next several quarters. You reminded us that could be a very attractive pricing opportunity over time given how wide the spread is. Yeah.
Just wanted to see if there's any significant opportunity for JBI or if the competitive environment has changed to make that more or less likely. Thanks.
Darren Field (President of Intermodal)
Well, more than anything, I want to make sure 1% positive price on revenue per load exofuel is what we reported and is accurate. But as you heard, our Eastern growth is up 16% where Transcon was plus 5. Taking our that's a negative to mix. So the positive pricing that's out there is more has been material for us to overcome a negative from the mix as we grow in the Eastern network. Those loads are lower revenue per load units than a Transcon load is.
That doesn't make it work at a worse margin. That's not at all what I'm saying is it's all contributing to positive benefits inside our network. But prices in the transcon I absolutely believe will absolutely continue to close the gap back to what is their historical norm against truckload over time. It just hasn't. It hasn't moved as fast because the amount of business that comes to us to convert from the highway to rail in Transcon is just a smaller percentage of the opportunities.
There's not as much of that business for us to go convert today as there is in the East. And so that's where you see a greater opportunity to impact price mid cycle with new opportunities that present itself. It's just stronger in the east than it is transcon. As we move into next year's bid cycle, I fully anticipate the opportunity to talk and work with our customers around inflationary cost and generate positive improvements in in our margins on that business as well.
And I want to add something to that and kind of reiterate points that Darren made in some of his prepared comments. But also take a step back and think about our broader portfolio. I mean, in cycles past, you know, everyone sort of understands that intermodal pricing lags truckload pricing and pricing is typically what drives improvements in financial performance. And I want to just make sure to reiterate this team has executed extremely well on being very disciplined on cost, controlling what we control, being operationally excellent on safety and service, and then obviously giving you guys the update on our cost to serve initiative.
And with our two largest segments, both intermodal and dedicated that don't really have as quick of a movement in transactional pricing as what we've seen in ICS. And I think what we'll see in the coming quarters with JBT, you know, our financial performance has largely been driven by what we can control with the benefits of what is happening in the market still to come. And so I fully anticipate dedicated intermodal JVT, ICS and all of the businesses will have the benefit of seeing improved pricing opportunities.
But what you've seen executed from the team over the last several quarters has largely been what we can control. And so I know pricing is a big topic. We look forward to what the market presents us for opportunities to price to the value we create. Truckload pricing has moved up a lot. We haven't even really seen truckload providers print results yet that show a meaningful movement in contract pricing. And so we'll just see how supply and demand play out in the industry.
But I think that there will be opportunities for us to take advantage of what the market presents.
OPERATOR
The next question will come from Jordan Alliger with Goldman Sachs. Please go ahead.
Jordan Alliger, Analyst at Goldman Sachs
Hi. So a couple things, one, I'm just curious, just coming on, talking about dedicated, you know, in the context of what you mentioned on the pipeline and against the startup timing and how do you think about that modest EBIT growth that you talked about? I don't know if you provided an update around that or sort of the progression as we think from here and then I just wanted to come back to a volume question again. I think you had mentioned the shape of the peak could look similar and I just wanted to understand if you mean similar to 2025 as we went from 2Q to 3Q and into 4Q.
Brad Hicks, EVP & President of Dedicated Contract Services
Jordan, this is Brad. I'll start with dedicated and maybe flip it over to Spencer to reiterate comments on peak. You know one thing, we've certainly seen the pipeline grow. It's at record levels, even higher than we saw at the peak of COVID. And so I do think that demand for professional dedicated solutions is peaking. You know, is that a factor of the driver market and the pressure that people are seeing? Yes. Is it a factor on what we're seeing in the one way rate market and the pressures that shippers are seeing?
Yes. I commented already that Montgomery probably plays a role as well. But we can't forget that it's often a long sales cycle and dedicated, historically that's 12 to 18 months. There are times when shippers are motivated to go a little faster to introduce those solutions and the value that those solutions create. Hard to say at this point if we're seeing that speed up decision making. But we're really excited about not only where we sit with the pipeline, but really just the great performance that our team has had through execution, our safety performance of our professional drivers and really the great work of our field operations and execution supporting our customers and driving value. You know, a lot of our growth historically has been organically and there are numerous conversations and opportunities inside that pipeline growing with customers that we already have. We certainly are always motivated and driven to grow our customer count and grow with new customers. And there's a fair amount of those opportunities inside of our pipeline as well. And so we're really optimistic about where we sit.
Really excited about our performance coming through Q2. If you really think about close to 100 basis point headwind or pressure on what fuel did coming in at 100 operating ratio in terms of how our fuel surcharge mechanisms work puts us fundamentally inside of our target margins just barely. But we're excited that we made that step.
Spencer Frazier, EVP of Sales and Marketing
Yeah. Hey Jordan, I think to your question, I would answer that that it would be similar to 2025 and also as our volumes move from Q2 to 3 to 4, when I talk about shape and timing.
OPERATOR
The final question will come from David Vernon with Bernstein. Please go ahead.
David Vernon, Analyst at Bernstein
Hey, good afternoon. Thank you. Just a quick driver wage issue. I mean Shelly or Nick, could you maybe put some numbers around what kind of wage increases you're seeing out marketplace? A little bit about how you guys are positioned the rest of the broader industry. And if you're talking to a generalist and you're seeing this sort of supply demand problem with labor if wages go up, where does the industry expect labor from in this kind of market?
Nick Hobbs, Chief Operating Officer
Hey David, you kind of were coming in and out. I think we understand it to be a driver wage question. And where do we think the supply of drivers would be coming from? I'll let Nick handle that. Yeah, I would just say we are seeing some pressure on driver wages. There are certain markets where we've had sign on bonuses and those are increasing. The locations are increasing where we have sign on bonuses. So the driver market is clearly getting tighter.
But that really flows into our sweet spot with our corporate driver personnel and our ability to hire drivers and attract drivers. We think it sets us up very well across pretty much every segment and so really excited about that. The second part of the question where you think you'll get I think it'll pull some people that maybe have left the industry previously come back into the industry. I also think there'll be some good training opportunities for young people, but that's nothing quick that's going to solve that.
So I think we're in for a longer term answer to get the capacity where it needs to be. And I think there's always a good source of maybe a lot more military folks come in and some government getting involved on providing some training for people leaving the military. So there's some good sources out there, but there's not a good quick solution tomorrow. So I think that means capacity will remain tight for a while, which that means sets everything up for more intermodal conversions while we get that sorted out on the capacity side.
Shelley Simpson, President and CEO
David, I was just going to expand on one of Nick's comments around our corporate driver personnel and I think we've talked about this over the years, but we have tremendous experience. We believe that it is a competitive advantage for us and we believe that we are positioned to outperform the market with respect to attract, recruit and retain drivers. And so while this pressure is felt across the entire industry, we think that we're best positioned to succeed when that pressure exists.
And I think that we've proven that in our history in the past. And I think that we're already seeing signs of being able to win in this environment that we find ourselves in right now.
Brad Hicks, EVP & President of Dedicated Contract Services
Yep, that's exactly what I was going to say. Brad, just a couple of comments. This has been a long time coming. So very welcoming to be in this part of the cycle. And if you look at our performance over the past decade and look at when the periods of tightness occurred, you will see the organization thrives during those periods because our customers get constrained. Spencer talked about that. And they come to who they trust and they trust. And so what makes it great for us to work with our customers is we can help them with conversion intermodal, we can build better fleets for them and we have plenty of capacity to help them on the highway and final mile side. So I think we are best set up and positioned to do very well in this cycle.
OPERATOR
This concludes our question and answer session. I would like to turn the conference back over to Ms. Shelley Simpson for any closing remarks.
Shelley Simpson, President and CEO
You know, this quarter was a great example of what we do best. Our team stayed focused, we executed, we're serving our customers operated safely and just made great disciplined decisions. And that strengthened our business. And that will happen even over time. You'll see more strengthening. But the results reflect the strength of the foundation we've been building and the work we've done. We've improved our efficiency, we've lowered our cost to serve and and the decision to retain our talent through one of the most prolonged freight recessions our industry has experienced. I believe we are seeing the benefit and will only continue to see more benefit going forward. They've made us a stronger company, not just for this cycle, but for any cycle.
And because of the work of our 31,000 people, we're entering the second half of the year with momentum and clear focus on creating long term value for our customers and our shareholders. Thanks for your time, continued support and can't wait to update you next quarter.
OPERATOR
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment