Stock Story -
Logistics solutions provider Hub Group (NASDAQ:HUBG) missed analysts' expectations in Q2 CY2024, with revenue down 5.2% year on year to $986.5 million. The company's full-year revenue guidance of $4.15 billion at the midpoint also came in 4.9% below analysts' estimates. It made a GAAP profit of $0.47 per share, down from its profit of $0.72 per share in the same quarter last year.
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Hub Group (HUBG) Q2 CY2024 Highlights:
- Revenue: $986.5 million vs analyst estimates of $1.09 billion (9.7% miss)
- EPS: $0.47 vs analyst expectations of $0.48 (1.2% miss)
- The company dropped its revenue guidance for the full year from $4.5 billion to $4.15 billion at the midpoint, a 7.8% decrease
- EPS (GAAP) Guidance for the full year is $1.90 at the midpoint, missing analysts' estimates by 3.6%
- Gross Margin (GAAP): 11.9%, down from 13% in the same quarter last year
- Free Cash Flow of $52.78 million, down 20.6% from the previous quarter
- Market Capitalization: $2.91 billion
Started with $10,000, Hub Group (NASDAQ:HUBG) is a provider of intermodal, truck brokerage, and logistics services, facilitating transportation solutions for businesses worldwide.
Air Freight and LogisticsThe growth of e-commerce and global trade continues to drive demand for expedited shipping services, presenting opportunities for air freight companies. The industry continues to invest in advanced technologies such as automated sorting systems and real-time tracking solutions to enhance operational efficiency. Despite the advantages of speed and global reach, air freight and logistics companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales GrowthA company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Over the last five years, Hub Group's sales were flat. This shows demand was soft and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Hub Group's recent history shows its demand has stayed suppressed as its revenue has declined by 10.9% annually over the last two years. Hub Group isn't alone in its struggles as the Air Freight and Logistics industry experienced a cyclical downturn, with many similar businesses seeing lower sales at this time.
This quarter, Hub Group missed Wall Street's estimates and reported a rather uninspiring 5.2% year-on-year revenue decline, generating $986.5 million of revenue. Looking ahead, Wall Street expects sales to grow 13.1% over the next 12 months, an acceleration from this quarter.
Operating MarginHub Group was profitable over the last five years but held back by its large expense base. It demonstrated paltry profitability for an industrials business, producing an average operating margin of 5.7%. This result isn't too surprising given its low gross margin as a starting point.
Looking at the trend in its profitability, Hub Group's annual operating margin might have seen some fluctuations but has remained more or less the same over the last five years, which doesn't help its cause.
This quarter, Hub Group generated an operating profit margin of 4%, down 2 percentage points year on year. Since Hub Group's operating margin decreased more than its gross margin, we can assume the company was recently less efficient because expenses such as sales, marketing, R&D, and administrative overhead increased.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Sadly for Hub Group, its EPS declined by 10.5% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. Hub Group's two-year annual EPS declines of 37.1% were bad and lower than its two-year revenue performance.
In Q2, Hub Group reported EPS at $0.47, down from $0.72 in the same quarter last year. This print slightly missed analysts' estimates. Over the next 12 months, Wall Street expects Hub Group to grow its earnings. Analysts are projecting its EPS of $1.85 in the last year to climb by 20.9% to $2.24.
Key Takeaways from Hub Group's Q2 Results We struggled to find positives in these results. Its revenue and EPS missed analysts' estimates and it lowered its full-year revenue guidance. Its full-year EPS outlook also fell short of Wall Street's estimates. Overall, this was a bad quarter for Hub Group. The stock remained flat at $46.20 immediately following the results.
