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Hub Group Sees Record Quarter Despite Softening Demand And Increased Competition

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Hub Group, Inc. (NASDAQ: HUBG) reported earnings per share (EPS) of $0.87, well ahead of the analysts' expectations of $0.74 and last year's $0.51.

The multimodal supply chain solutions provider reported that consolidated revenue increased 3 percent year-over-year to $921 million. Operating income improved 60 percent to $41 million as the company's operating margin increased 160 basis points compared to the year ago period at 4.4 percent. Yield improvement (pricing) and an "intense focus" on cost management were cited as the reasons for the improvement.

HUBG's largest division, intermodal, reported a 1 percent increase in revenue to $543 million in the second quarter. Improved yield and efficiency were largely offset by a 7 percent decline in intermodal volumes. The volume declines stemmed from a weaker demand environment, increased truckload (TL) and intermodal competition. Lane cancellations and weather disruptions accounted for a 2 percent volume decline.

Truck brokerage revenue declined 7 percent year-over-year to $107.1 million. The division saw an 18 percent increase in loads moved, but that was more than offset by fuel headwinds, softer pricing and freight mix, which were a 25 percent drag in the period. The less-than-truckload (LTL) brokerage business, CaseStack, was noted as the driver of the unfavorable revenue mix in the release.

Logistics revenue increased 15 percent to $194 million given the CaseStack acquisition and HUBG's dedicated revenue grew 5 percent to $78 million year-over-year due to pricing improvements and penetration in new accounts.

The bottom-end of management's 2019 guidance range was raised $0.05 to $3.30 with the top-end of the range left untouched at $3.40. Revenue is forecasted to grow in the mid-single digit range for the full year. 

The company's full year capital expenditure range was lowered to $100 million to $110 million from $115 million to $125 million. HUBG previously announced a $55 million budget for a new building at its headquarters in Oak Brook, Illinois, $25 million of which was to be spent in 2019.

HUBG will host a call to discuss these results with analysts and the media at 5:00 p.m. EDT.

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