J.B. Hunt Transport Services (JBHT) is finding itself in an uncomfortable position: freight spot rates are climbing rapidly, which sounds like good news until you realize the company's locked into contracts that can't adjust fast enough. The result? A classic margin squeeze.

Bank of America Securities analyst Ken Hoexter raised his price target for J.B. Hunt to $216 from $208 while keeping a Buy rating, but the upgrade comes with some cautionary notes about the pressure building across several business lines.

When Rising Rates Hurt Instead of Help

Here's the problem: DAT Dry Van spot rates jumped to $1.73 per mile this week from $1.65 last week. That's the highest reading since January 2023 and represents a 4.7% increase from third-quarter averages. This marks the fourth straight week of elevated increases, well above the four-year weekly average of 1.4%.

Sounds great, except J.B. Hunt has to pay these inflated spot rates to secure capacity while many of its customer contracts are still priced at older, lower rates. Hoexter noted that CEO Shelley Simpson acknowledged demand was strong, but inflation is pressuring performance. The company's peak season unfolded largely as expected—neither particularly strong nor weak—but freight conditions remain especially challenging, particularly in the brokerage business.

Segment-by-Segment Outlook

With buy rates rising faster than pricing can reset, Hoexter expects margins to take a hit in both Brokerage (ICS) and Truckload (JBT). He's forecasting the fourth-quarter ICS operating ratio to deteriorate 120 basis points to 100.5%, which essentially means that segment will operate at breakeven or slightly negative margins.

For Intermodal, Hoexter anticipates 540,500 loads (up 0.1% sequentially), with revenue per load holding flat at $2,836 due to mix changes. The operating ratio should land at 92.0%, down 40 basis points sequentially but up 70 basis points year-over-year. That translates to Intermodal operating income of $123 million, flat from the previous quarter.

The Dedicated segment looks relatively stable, with operating income expected at $104 million, also flat sequentially. The operating ratio should improve slightly to 88.1% from 88.7%, reflecting a normal seasonal decline.

Final Mile is where things get more concerning. Hoexter expects a seasonal fourth-quarter lift, but demand for bulky items like exercise equipment remains weak and the housing market continues to soften. He lowered the Final Mile revenue growth target to a decline of 10% year-over-year (from a previously expected decline of 6%) and revised the operating ratio target to 97.0% from 96.5%.

Earnings Adjustment

Reflecting these pressures, Hoexter revised his fourth-quarter EPS estimate down 3% to $1.82 from $1.87, though he kept his 2026 EPS forecast unchanged at $7.30. The message seems to be: short-term pain from the spot rate surge, but the longer-term story remains intact.

JBHT shares were down 1.01% at $194.78 at the time of publication on Wednesday.