Hub Group (HUBG)

Logistics solutions provider Hub Group (NASDAQ:HUBG) announced better-than-expected revenue in Q3 CY2025, but sales fell by 5.3% year on year to $934.5 million. On the other hand, the company’s full-year revenue guidance of $3.65 billion at the midpoint came in 0.7% below analysts’ estimates. Its GAAP profit of $0.47 per share was 2.8% below analysts’ consensus estimates.

Company Overview

Started with $10,000, Hub Group (NASDAQ:HUBG) is a provider of intermodal, truck brokerage, and logistics services, facilitating transportation solutions for businesses worldwide.

The growth of e-commerce and global trade continues to drive demand for expedited shipping services, presenting opportunities for air freight companies. The industry continues to invest in advanced technologies such as automated sorting systems and real-time tracking solutions to enhance operational efficiency. Despite the advantages of speed and global reach, air freight and logistics companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors in the logistics solutions industry include C.H. Robinson (NASDAQ:CHRW), GXO Logistics (NYSE:GXO), and Landstar System (NASDAQ:LSTR).

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Hub Group grew its sales at a sluggish 1.6% compounded annual growth rate. This was below our standards and is a poor baseline for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Hub Group’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 9% annually. Hub Group isn’t alone in its struggles as the Air Freight and Logistics industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, Hub Group’s revenue fell by 5.3% year on year to $934.5 million but beat Wall Street’s estimates by 0.7%.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection indicates its newer products and services will spur better top-line performance, it is still below average for the sector.

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Hub Group has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 12.7% gross margin over the last five years. That means Hub Group paid its suppliers a lot of money ($87.26 for every $100 in revenue) to run its business.

In Q3, Hub Group produced a 11.5% gross profit margin, in line with the same quarter last year. Zooming out, the company’s full-year margin has remained steady over the past 12 months, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Hub Group’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 5.6% over the last five years. This profitability was paltry for an industrials business and caused by its suboptimal cost structureand low gross margin.

Analyzing the trend in its profitability, Hub Group’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Hub Group’s performance was poor, but we noticed this is a broad theme as many similar Air Freight and Logistics companies saw their margins fall (along with revenue, as mentioned above) because the cycle turned in the wrong direction.

In Q3, Hub Group generated an operating margin profit margin of 4.2%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Hub Group’s EPS grew at an unimpressive 8% compounded annual growth rate over the last five years. This performance was better than its flat revenue but doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Hub Group’s earnings to better understand the drivers of its performance. A five-year view shows that Hub Group has repurchased its stock, shrinking its share count by 10.2%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Hub Group, its two-year annual EPS declines of 28.1% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q3, Hub Group reported EPS of $0.47, up from $0.39 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects Hub Group’s full-year EPS of $1.73 to grow 18.5%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Hub Group has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.8%, subpar for an industrials business.

Hub Group’s free cash flow clocked in at $19.39 million in Q3, equivalent to a 2.1% margin. The company’s cash profitability regressed as it was 1.5 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Hub Group hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked. Its five-year average ROIC was 12.4%, higher than most industrials businesses.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Hub Group’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Hub Group reported $119.7 million of cash and $498.8 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $342.3 million of EBITDA over the last 12 months, we view Hub Group’s 1.1× net-debt-to-EBITDA ratio as safe. We also see its $7.64 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Hub Group blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. On the other hand, its EPS missed and its full-year revenue guidance fell slightly short. Overall, this print was mixed but still had some key positives. The stock remained flat at $35.46 immediately following the results.

Updated: December 4, 2025 at 10:15 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Hub Group.

Hub Group falls short of our quality standards. For starters, its revenue growth was weak over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its low gross margins indicate some combination of competitive pressures and high production costs.

Hub Group’s P/E ratio based on the next 12 months is 20.1x. This valuation multiple is fair, but we don’t have much confidence in the company. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $39.81 on the company (compared to the current share price of $39.58).