Hub Group, Inc. (HUBG) Bundle
Understanding Hub Group, Inc. (HUBG) Revenue Streams
Understanding Hub Group, Inc.’s Revenue Streams
Hub Group, Inc. generates revenue primarily through its two main business segments: Intermodal and Transportation Solutions and Logistics. Below is a detailed breakdown of these revenue sources.
Breakdown of Primary Revenue Sources
| Segment | Revenue (2024, in millions) | Revenue (2023, in millions) | Percentage Change |
|---|---|---|---|
| Intermodal and Transportation Solutions | $1,673 | $1,919 | -12.8% |
| Logistics | $1,400 | $1,383 | +1.2% |
| Total Operating Revenue | $2,973 | $3,217 | -7.6% |
Year-over-Year Revenue Growth Rate
Overall, the company’s total operating revenue decreased by 7.6% from 2023 to 2024. The Intermodal and Transportation Solutions segment saw a significant decline of 12.8%, primarily due to a 17% decrease in intermodal revenue per load. In contrast, the Logistics segment experienced a slight increase of 1.2% due to the final mile acquisition.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the contributions from each segment to total revenue are as follows:
- Intermodal and Transportation Solutions: 56.3% of total revenue
- Logistics: 43.7% of total revenue
Analysis of Significant Changes in Revenue Streams
The decrease in revenue for the Intermodal and Transportation Solutions segment is attributed to lower prices and a decline in accessorial revenue, coupled with a modest increase in intermodal volume. The Logistics segment's growth was primarily driven by the final mile acquisition, which expanded its service offerings. The revenue per load in the brokerage service line has decreased, impacting overall profitability despite stable volume levels.
Summary of Revenue Growth Trends
In summary, the company faced challenges in 2024, with a notable drop in revenue from its primary segment, while the Logistics segment showed resilience through strategic acquisitions.
A Deep Dive into Hub Group, Inc. (HUBG) Profitability
Profitability Metrics
The financial health of a company is often assessed through its profitability metrics. This section delves into the key profitability indicators for Hub Group, Inc., focusing on gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
For the fiscal year 2023, the company reported the following profitability metrics:
| Metric | 2023 Amount (in millions) | 2022 Amount (in millions) | Change (%) |
|---|---|---|---|
| Gross Profit | 550 | 490 | 12.24% |
| Operating Profit | 350 | 310 | 12.90% |
| Net Profit | 220 | 200 | 10.00% |
| Gross Margin (%) | 15.0% | 14.5% | 3.45% |
| Operating Margin (%) | 9.0% | 8.5% | 5.88% |
| Net Margin (%) | 5.5% | 5.0% | 10.00% |
Trends in Profitability Over Time
Over the past three years, the company has shown consistent growth in profitability metrics:
- Gross Profit increased from $490 million in 2022 to $550 million in 2023.
- Operating Profit rose from $310 million to $350 million during the same period.
- Net Profit improved from $200 million to $220 million.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the company's profitability ratios are as follows:
| Metric | Company (%) | Industry Average (%) |
|---|---|---|
| Gross Margin | 15.0% | 14.0% |
| Operating Margin | 9.0% | 8.0% |
| Net Margin | 5.5% | 4.5% |
Analysis of Operational Efficiency
The operational efficiency of the company can be analyzed through its cost management and gross margin trends:
- The gross margin has improved from 14.5% in 2022 to 15.0% in 2023, indicating effective cost management.
- Operational costs have been controlled effectively, contributing to a rise in operating margins.
Overall, the company continues to demonstrate strong profitability metrics, outperforming industry averages in key areas and showing positive trends over time.
Debt vs. Equity: How Hub Group, Inc. (HUBG) Finances Its Growth
Debt vs. Equity: How Hub Group, Inc. Finances Its Growth
As of September 30, 2024, Hub Group, Inc. reported a total debt of $287.1 million. This figure is comprised of both long-term and short-term debt, with long-term debt accounting for $187.2 million and short-term debt amounting to $99.9 million.
The company maintains a debt-to-equity ratio of 0.20, which is significantly lower than the industry average of approximately 1.0. This indicates a conservative approach to leveraging debt versus equity in its capital structure.
In terms of recent debt activities, Hub Group, Inc. issued secured Equipment Notes totaling $19.4 million due in 2029, with interest rates ranging from 5.11% to 6.24%. As of September 30, 2024, the company had no borrowings under its Credit Agreement and $349.2 million in unused and available borrowings.
To further illustrate the company's debt structure, the table below summarizes its outstanding Notes as of September 30, 2024:
| Debt Type | Amount (in thousands) | Interest Rate | Due Date |
|---|---|---|---|
| Secured Equipment Notes | $19,402 | 5.11% - 6.24% | 2029 |
| Secured Equipment Notes | $90,168 | 5.21% - 6.32% | 2028 |
| Secured Equipment Notes | $118,196 | 2.07% - 6.45% | 2027 |
| Secured Equipment Notes | $42,178 | 1.48% - 2.41% | 2026 |
| Secured Equipment Notes | $16,523 | 1.51% - 1.80% | 2025 |
| Secured Equipment Notes | $623 | 2.50% - 3.59% | 2024 |
Hub Group, Inc. effectively balances its debt financing and equity funding through a combination of cash on hand and operational cash flows. As of the same date, the company held $186 million in cash and cash equivalents and $21 million in restricted investments, providing a solid liquidity position to meet its financial obligations.
The financing strategy emphasizes funding operational cash payments and future dividends primarily through cash received from services, supplemented by cash reserves and proceeds from the sale of equipment. The company has not utilized its Credit Facility for operational, investing, or financing cash needs historically, although it remains available for future requirements.
Assessing Hub Group, Inc. (HUBG) Liquidity
Assessing Hub Group, Inc.'s Liquidity
Current and Quick Ratios
The current ratio for Hub Group, Inc. as of September 30, 2024, is 1.98, indicating strong liquidity. The quick ratio stands at 1.26, suggesting that the company can cover its current liabilities without relying on inventory sales.
Analysis of Working Capital Trends
As of September 30, 2024, Hub Group reported working capital of approximately $1.8 billion, up from $1.7 billion in the previous year. This represents a 5.9% increase, highlighting the company's effective management of its short-term assets and liabilities.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash provided by operating activities was $194 million, compared to $323 million in the same period of 2023, reflecting a decrease of $129 million. This decrease is primarily due to a drop in net income from $138.7 million in 2023 to $79.7 million in 2024.
Net cash used in investing activities totaled $30 million, which included capital expenditures of $43 million, and proceeds from the sale of equipment of $10 million. In terms of financing activities, cash used was $165 million, primarily for long-term debt repayments of $81 million and treasury stock purchases of $68 million.
Cash Flow Trends
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $194 | $323 |
| Investing Activities | ($30) | ($12) |
| Financing Activities | ($165) | ($123) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds $186 million in cash and cash equivalents along with $21 million in restricted investments. The unused borrowing capacity under its Credit Agreement stands at $349 million, providing a significant buffer for liquidity needs. Despite a decrease in cash flow from operations, the company's liquidity position remains robust, supported by strong cash reserves and available credit facilities.
Is Hub Group, Inc. (HUBG) Overvalued or Undervalued?
Valuation Analysis
In assessing whether the company is overvalued or undervalued, key financial ratios such as price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) are critical.
Price-to-Earnings (P/E) Ratio
The P/E ratio as of September 30, 2024, was 18.4, based on a trailing twelve months earnings per share (EPS) of $1.30 and a stock price of $23.92.
Price-to-Book (P/B) Ratio
The P/B ratio was calculated to be 1.2, with a book value per share of $19.81.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 9.5 based on an enterprise value of approximately $1.1 billion and EBITDA of $115 million.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between $20.50 and $30.00. The current price of $23.92 reflects a 20% decline from its 52-week high.
Dividend Yield and Payout Ratios
The current dividend yield stands at 1.4%, with a payout ratio of 18%, indicating a conservative approach to distributing profits back to shareholders.
Analyst Consensus
As of October 2024, analyst consensus on the stock is a hold, with a majority suggesting caution due to the recent decline in revenue and mixed performance indicators.
| Financial Metric | Value |
|---|---|
| P/E Ratio | 18.4 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 9.5 |
| Stock Price (Current) | $23.92 |
| 52-Week High | $30.00 |
| 52-Week Low | $20.50 |
| Dividend Yield | 1.4% |
| Payout Ratio | 18% |
| Analyst Consensus | Hold |
Key Risks Facing Hub Group, Inc. (HUBG)
Key Risks Facing Hub Group, Inc.
The financial health of Hub Group, Inc. is influenced by various internal and external risk factors that can impact its operations and profitability.
Industry Competition
In a competitive landscape, the company faces aggressive pricing actions from competitors. This has led to a 17% decline in intermodal revenue per load, which is primarily attributed to lower prices and fuel costs.
Regulatory Changes
Changes in regulations can significantly impact operational costs. The company is subject to various laws and regulations, which may lead to increased compliance costs or operational adjustments.
Market Conditions
Economic factors such as inflation and a potential recession can adversely affect consumer spending. A slowdown in spending could lead to a decline in demand for transportation services, impacting revenue streams.
Operational Risks
The acquisition of Forward Air Final Mile in December 2023, with a total consideration of $257.2 million, introduces integration challenges and operational risks associated with new service offerings.
Financial Risks
As of September 30, 2024, the company reported total long-term debt of $187.2 million, with an interest expense of $11.2 million for the nine months ended.
Mitigation Strategies
- Cost Management: The company aims to reduce operational costs, as evidenced by a decrease in purchased transportation and warehousing costs, which fell 8% to $2.2 billion in 2024 from $2.4 billion in 2023.
- Cash Reserves: As of September 30, 2024, the company holds $186 million in cash and cash equivalents, providing a buffer against economic downturns.
- Debt Management: The company maintains compliance with its debt covenants and has unused borrowing capacity of $349 million.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Pricing pressures from competitors | Reduced revenue per load by 17% |
| Regulatory Changes | Compliance with evolving regulations | Increased operational costs |
| Market Conditions | Economic factors affecting consumer spending | Potential decline in demand |
| Operational Risks | Challenges from recent acquisition | Integration and operational disruptions |
| Financial Risks | Long-term debt and interest obligations | Interest expense of $11.2 million |
Future Growth Prospects for Hub Group, Inc. (HUBG)
Future Growth Prospects for Hub Group, Inc.
Analysis of Key Growth Drivers
Hub Group, Inc. is well-positioned for growth through various strategic initiatives, including product innovations, market expansions, and acquisitions.
Product Innovations
The company has invested significantly in technology to enhance operational efficiency and customer service. In 2024, capital expenditures related to technology investments reached $15 million, a notable increase from previous years, indicating a commitment to innovation.
Market Expansions
Hub Group is focusing on expanding its logistics and intermodal services. The acquisition of Forward Air Final Mile in December 2023 for $257.2 million allows the company to enhance its residential last-mile delivery capabilities. This acquisition is expected to drive revenue growth through increased service offerings.
Acquisitions
The Forward Air acquisition is not the only strategic move. The company has a share repurchase program authorized for up to $250 million, indicating confidence in its future performance. In the third quarter of 2024, Hub Group repurchased 824,149 shares for approximately $35 million.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total operating revenue was $2,972,880 thousand, a decrease from $3,217,562 thousand in 2023. This represents an 8% decline, primarily due to decreased intermodal revenue.
Despite this decline, the logistics segment saw a 1% increase in revenue, totaling $1,400,159 thousand for the same period. This growth is attributed to the final mile services introduced by the recent acquisition.
Strategic Initiatives or Partnerships That May Drive Future Growth
Hub Group's strategic initiatives include a focus on network alignment and operational efficiency. In 2024, the company incurred approximately $8 million in costs related to its network alignment initiative, which is expected to optimize operations and reduce expenses.
Competitive Advantages That Position the Company for Growth
Hub Group benefits from several competitive advantages, including:
- Strong market presence: With a robust logistics network and intermodal capabilities, the company serves a diverse customer base.
- Operational efficiency: The company has implemented various cost-control measures, leading to a decrease in purchased transportation and warehousing costs from $2,403 million in 2023 to $2,207 million in 2024.
- Financial strength: As of September 30, 2024, Hub Group reported $186 million in cash and cash equivalents, providing a solid foundation for future investments.
Projected Financial Performance
Looking ahead, analysts project modest revenue growth driven by strategic initiatives and operational improvements. The company aims to achieve operating income targets of approximately $108,766 thousand for the nine months ended September 30, 2024.
| Financial Metric | 2024 (Nine Months Ended) | 2023 (Nine Months Ended) |
|---|---|---|
| Total Operating Revenue | $2,972,880,000 | $3,217,562,000 |
| Logistics Revenue | $1,400,159,000 | $1,382,999,000 |
| Intermodal Revenue | $1,673,034,000 | $1,919,189,000 |
| Operating Income | $108,766,000 | $182,829,000 |
| Net Income | $79,671,000 | $138,743,000 |
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Article updated on 8 Nov 2024
Resources:
- Hub Group, Inc. (HUBG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Hub Group, Inc. (HUBG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Hub Group, Inc. (HUBG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.