Tightened trucking capacity has driven up shipping rates nationwide. It’s also goosed the stock price of an Oak Brook transportation and logistics company.

Hub Group helps customers haul goods across the country, whether that’s soybeans for Archer Daniels Midland, lumber for Lowe’s or diapers for Kimberly-Clark. Last year’s $4.03 billion in revenue made it one of metro Chicago’s 50 largest publicly traded companies, and because two-thirds of its business comes from shippers seeking a combination of rail and truck, rather than road transport alone, it holds an edge in the current freight market. “We’re cheaper than trucks,” says CEO David Yeager.

For now, that’s a bulletproof sales pitch. The company reported strong second-quarter results: Net income rose to $22.1 million, up from $9.5 million in the second quarter of 2017. The company raised its earnings guidance for the year to $2.83 per share from $2.73. Hub Group’s share price has risen 52 percent over the past year, bringing the company’s market cap to $1.77 billion. The share price hit an all-time high of $56.60 on Aug. 2 before closing at $51.05.

With so much going right, the question for investors is, how long can it last?

Hub Group was founded in 1971 in a windowless Hinsdale office by the late Phillip and Joyce Yeager, after Phillip quit his job at a railroad to pursue the venture. Their sons, David and Mark, still control 61 percent of the company’s voting shares. Rail-to-truck shipping, now known as intermodal, was then called “piggybacking.” It costs 10 to 20 percent less than shipping over the highway only, but it takes an extra day or two to move the freight.

Hub Group has grown into the second-largest company in its sector, contracting with railroads to move goods stowed in the 32,000 containers it owns or leases. (It even has a few in its headquarters.) Customers like Walmart prefer contracting their shipping to a specialist with sophisticated technology; railroads like companies that buy in bulk. Hub Group now also includes a truck brokerage and logistics services.

The past two years have not been kind to intermodal players. Low prices for diesel fuel and plenty of trucking capacity combined to keep over-the-road rates attractive for manufacturers and retailers.

That started to change at the end of 2017. The strong economy meant higher demand for shipping. At the same time, trucking companies were having trouble finding drivers to move all those goods. The shortage has been a long time in the making, with the median driver age at 55 and the median pay at $42,000 a year. It was exacerbated in December when the federal government required a new safety measure: Truckers had to install electronic logging devices that prevented them from driving more than 11 hours without a break. Trucking prices spiraled upward. In July, spot rates, the fluctuating prices that carriers charge shippers to move goods immediately, were up 29 percent from a year earlier.


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