Freight brokers call market bottom, look for spring tightening

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For freight brokers, the story in the first quarter of 2019 was one of relatively normal freight volumes, loose capacity and margins that widened even as brokers bid aggressively on contract freight and undercut asset-based carriers.

Take J.B. Hunt’s (NASDAQ: JBHT) brokerage, Integrated Capacity Solutions (ICS), as an example. Hunt reported first quarter earnings on April 15. ICS posted volume growth of 15 percent year-over-year in the first quarter, but revenue per load dropped 11.5 percent to $1,041. In other words, ICS grew its volumes by cutting prices by double-digits. Still – and this is why market conditions were so favorable for brokerages this past quarter – ICS was able to widen its gross margins from 14.4 percent in the first quarter of 2018 to 16.5 percent in the first quarter of 2019.

Even as JBHT’s brokerage scooped up contracted volume and undercut the low single digit contract rate increases asset-heavy carriers were calling for, it didn’t chase the market all the way down and actually widened its gross margins. That largely tracks with the information FreightWaves reporters have heard from smaller, privately held freight brokerages in conversations over the past two weeks.

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