Hub Group, Inc., has announced fourth quarter 2018 net income of $48.9 million, or diluted earnings per share of $1.46. Income from continuing operations for the current quarter was $33.7 million, or $1.01 per diluted share. Income from discontinued operations for the current quarter was $15.2 million, or $0.45 per diluted share.
Highlights of the quarter
- Acquired CaseStack, further diversifying our service lines
- 12% revenue growth driven by intermodal, logistics, and dedicated
- 30% gross margin growth
- 38% increase in operating income
Fourth quarter 2017, adjusted net income was $24.7 million excluding the impact of tax reform, or adjusted diluted earnings per share of $0.74. Adjusted income from continuing operations for the fourth quarter 2017 was $20.9 million excluding the impact of tax reform, or adjusted $0.62 per diluted share. The fourth quarter of 2017 included a $75.2 million, or $2.25 per diluted share, decrease in income taxes resulting from the change to our deferred tax liability at December 31, 2017 caused by the reduction of the federal tax rate as part of the Tax Cuts and Jobs Act. Income from discontinued operations for the fourth quarter 2017 was $3.9 million, or $0.12 per diluted share. Fourth quarter 2017 net income was $99.9 million, or diluted earnings per share of $2.99 including the impact of tax reform.
Results of Continuing Operations
Revenue for the current quarter was $1.0 billion compared with $909.2 million for the fourth quarter 2017 as a result of our success in providing multimodal solutions to our customers. Operating income for the current quarter increased 38% to $48.2 million versus $35.1 million for the fourth quarter 2017, primarily as a result of a favorable intermodal pricing environment, effective margin improvement initiatives, our focus on providing value added customer solutions, and continuing stringent cost control.
Fourth quarter intermodal revenue increased 18% to $598.1 million due to a 5% increase in load volume, price increases and higher fuel revenue. Transcon volume was up 7%, local west was up 8%, and local east was up 1%. Intermodal gross margin increased compared to the fourth quarter of 2017 primarily due to higher pricing, improved mix, better network balance and increased volume. These gains were partially offset by higher rail and drayage costs and 0.8 day worse utilization than 2017 primarily due to rail service. We ended the fourth quarter of 2018 with approximately 38,000 containers and 1,200 tractors assigned to the dray fleet.
Truck brokerage revenue decreased 12% to $140.3 million in the fourth quarter of 2018 compared to the same quarter of last year. Truck brokerage handled 3% fewer loads while fuel, price and mix combined were down 9%. Contractual volume represented 83% of total load volume compared to 72% in the fourth quarter of 2017. Truck brokerage gross margin decreased compared to the fourth quarter of 2017 primarily because of decreased spot business.
Fourth quarter logistics revenue increased 8% to $200.0 million due to the addition of CaseStack and growth with existing customers, partially offset by lost customers. Logistics gross margin increased compared to the fourth quarter of 2017 due to the addition of CaseStack, price increases, and growth with existing customers.
Dedicated revenue increased 40% to $80.0 million compared to the same quarter in the prior year due to growth with new customers. Dedicated gross margin increased compared to the fourth quarter of 2017 due to decreased use of outside carriers and improved driver productivity. We ended the fourth quarter of 2018 with approximately 1,400 tractors and 5,200 trailers in Dedicated.
Costs and expenses increased $18.8 million to $90.3 million in the fourth quarter of 2018 compared to $71.5 million in the fourth quarter of 2017 due primarily to the addition of CaseStack, a $6.7 million increase in incentive compensation, $2.7 million of higher professional and driver recruiting fees, $1.9 million increase in salaries due to higher headcount and employee raises, and $1.6 million increase in compensation expense from restricted stock partially offset by $1.4 million of lower commissions. Professional fees include $1.0 million of advisory and other services associated with acquisitions. Costs and expenses include a total of $1.9 million of non-cash amortization expense related to CaseStack and Hub Group Dedicated and $0.2 million of compensation expense associated with restricted stock issued to CaseStack management in connection with the acquisition.
2019 Outlook
We expect that our 2019 diluted earnings per share will range from $3.10 to $3.30. We expect amortization expense associated with the CaseStack and Hub Group Dedicated acquisitions will be approximately $13.5 million and compensation expense related to restricted stock issued to CaseStack management in connection with the acquisition will be approximately $2.4 million in 2019. We estimate that our 2019 capital expenditures will range from $90 million to $100 million. We project our effective tax rate for 2019 will range from 25.0% to 26.0%.
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