Hub Group (HUBG) Q2 Revenue Falls 8%

Key Points

• Non-GAAP earnings per share for Q2 2025 beat expectations at $0.45, while GAAP revenue for Q2 2025 missed expectations, coming in at $905.6 million.

• GAAP operating margin declined to 3.8% in Q2 2025 from 4.0% in Q2 2024, as both revenue and profits fell year over year.

• Full-year 2025 revenue guidance is $3.6 billion to $3.8 billion, with capital expenditures projected at $40 million to $50 million.

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Hub Group (NASDAQ:HUBG), a North American transportation and logistics provider, reported its earnings for the second quarter of fiscal 2025 on July 31, 2025. The most significant news from the release was that Non-GAAP earnings per share (EPS) of $0.45 edged past analyst expectations by $0.01, but GAAP revenue of $905.6 million missed estimates by $13.2 million. Compared to the prior year, GAAP revenue was down 8%. GAAP operating income and net income also decreased year over year. The performance highlighted ongoing margin discipline amid lower customer demand, with cost initiatives helping to buffer profitability.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Key Success Factors

Hub Group delivers a range of logistics solutions, most notably through its Intermodal and Transportation Solutions (ITS) and Logistics segments. The ITS segment combines rail and trucking to move containerized freight efficiently, meeting growing customer demand for sustainable, cost-effective transportation. Its Logistics segment covers services like freight brokerage, managed transportation, and final mile delivery, serving as a link in complete supply chains.

The company’s recent strategy has centered around five main areas: expanding intermodal capacity, building out logistics offerings, pursuing selective acquisitions, upgrading technology systems, and emphasizing sustainability. Owning a large fleet of containers and in-sourcing much of its drayage (local trucking to and from rail terminals) supports reliable service. Investments in technology and an ongoing shift toward energy-efficient logistics underpin efforts to attract and retain major customers.

Quarterly Performance: Revenue, Operations, and Segment Trends

Hub Group’s total GAAP revenue fell 8% year over year. This contraction stemmed from weaker demand, lower pricing, and reduced fuel surcharges, particularly affecting the Logistics segment. Non-GAAP net income declined 6.2%. Even as the top line shrank, cost controls and improved productivity cushioned overall margins.

ITS, which focuses on combining rail and trucking logistics, saw revenues decline by 5.9% to $528 million. Despite a 2% increase in intermodal freight volumes, weak pricing and lower fuel revenue weighed on sales. ITS operating income grew to $14.4 million, up from $13.6 million in the prior year, with the ITS segment GAAP operating margin improved to 2.7%. These gains were driven by greater efficiency—such as better container utilization, fewer empty hauls, and higher insourced drayage—offsetting the impact from competitive pricing and soft demand in dedicated trucking. Recent acquisitions, including capacity expansion in Mexico via the EASO joint venture, also played a role in supporting this segment’s results.

The Logistics segment recorded a drop in GAAP revenue to $404 million, down from $459 million in the prior year. This stemmed from lower volume and less revenue per load, especially in the brokerage business where spot market activity remained weak. Progress in managed transportation and warehousing partly offset the headwinds from brokerage, with warehousing and facility utilization improving thanks to successful cost initiatives. Brokerage is a logistics service that connects shippers with carriers, and margins in this area have remained under pressure as market rates have stayed low.

Capital deployment remained strategic. While Hub Group announced an agreement to acquire certain assets from Marten Intermodal to further expand its reach and traffic density, there were no major transformative acquisitions during the quarter. Previous deals, like the EASO Mexico joint venture, continue to fuel geographic and customer diversification. The company’s ongoing technology investments focused on boosting operational efficiency. Upgrades in customer management, pricing algorithms, and data analytics continued, while capital expenditure guidance was reduced for the year. Ongoing digital and process improvements are intended to make the network more resilient and cost-effective.

The company maintained its emphasis on sustainability as an EPA SmartWay® Transport Partner. While the quarter saw no new environmental announcements, the company’s offering of intermodal shipping continues to appeal to customers seeking lower carbon footprints for their supply chains.

Looking Ahead: Guidance and Watch List

For fiscal 2025, management issued updated guidance. Full-year 2025 revenue is expected to range from $3.6 billion to $3.8 billion. Diluted EPS (GAAP) is projected to be in the range of $1.75 to $2.25 for 2025. Capital expenditure plans were reduced, now set at $40 million to $50 million for 2025, reflecting less investment in the tractor fleet and a continued pause on container purchases. The effective tax rate is estimated to be about 24.5% for FY2025.

Management described near-term demand as uncertain, noting that revenue forecasts no longer include potential “peak season” surcharges. They identified possible upside if restocking or trade normalization occurs, but current planning is based on conservative scenarios. No detailed segment volume or pricing forecasts were provided, reflecting the ongoing uncertainty affecting customer import volumes and broader freight demand. HUBG pays a dividend, with $15 million returned to shareholders through dividends year to date as of Q2 2025.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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