What happened
Logistics and transportation provider Hub Group (NASDAQ: HUBG) reported first-quarter results that blew away analyst expectations and forecast full-year earnings numbers that were almost double what Wall Street had expected. The shares soared higher as a result, trading up as much as 15.1% on Friday. At 2:56 p.m. ET, shares were up 3.36%.
So what
Hub came into the quarter without a lot of expectations. The shares were down nearly 20% for the month ahead of earnings amid industry chatter of a rapidly decelerating trucking market that was eating into pricing for transportation companies including Hub.
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On Thursday evening after markets closed, Hub delivered first-quarter earnings of $2.58 per share on revenue of almost $1.3 billion, topping analyst expectations for $1.48 per share in earnings on sales of $1.19 billion. Hub also said it expects full-year 2022 earnings to come in at between $9 and $10 per share, well ahead of the consensus estimate for $6.19 per share.
CEO Dave Yeager said in a statement that while the environment was difficult, Hub benefited from "strong freight demand" and the company's focus on "yield improvement, operating efficiency, and fixed cost leverage." Hub's gross margin for the quarter was 16.6%, up from 11.8% during the first quarter of 2021.
Now what
The strong quarter led J.P. Morgan to upgrade Hub from overweight from neutral, and at least three other banks raised their price targets. Though competition remains intense, Hub's focus on intermodal transportation -- freight that moves among ships, trains, and trucks -- should help it to weather any trucking pricing battles on the horizon.
Even after Friday's boost, Hub is still down 10% for the month and off 17% year to date. With it trading at just 13.8 times earnings, this could be an attractive entry point for a company that appears well positioned to manage through a period of potential congestion and to accelerate from here as the road clears.
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