All right, we're going to go ahead and get started with the next presentation. It is a real pleasure to have J.B. Hunt at our conference this year. J.B. Hunt's an important transportation company, and got great insights across a number of different markets. W e have Shelley Simpson, the CEO, Brad Delco, the CFO, and Darren Field, the President of Intermodal. W e welcome you all and look forward to the discussion. Maybe just to get things kicked off, we're getting updates, different perspectives on the freight market. Wanted to get your take on how things are trending. I'll maybe lay out a couple of data points. W e had Werner was here earlier today. They seemed constructive on peak season, maybe seeing a little bit better than they expected.
They also said they're reducing fleet counts, so working on the capacity side in the one-way business. T hat's one data point. S ome of the LTL tonnage updates have been mixed, but not necessarily pointing to strength in November. It seems like it's still a generally soft freight backdrop. W hat are your thoughts? What are you seeing at J.B. Hunt?
Tom, first, thank you for having us. Brad, you and I are co-CFOs now.
Yeah, that's how you introduce Shelley as the CFO.
I thought, well, I can tell Brad how to do it. It'd be great.
Sorry. Well, obviously, the CEO.
I don't know if Brad wants me to be the CFO right this second, but as about where we're at, no, it's funny. As about where we're at from an overall freight perspective, we talked about in our third quarter earnings call that we believed we would have a peak season in conversations with our customers, that peak season would materialize, and really, it's happened about like what we thought, and so not a lot of surprise there. We've seen that across our business in general. It's not the biggest peak we've seen. It's not the worst peak we've seen, but one good thing, is that our customers have really moved out of that COVID era where they had a hard time forecasting what demand would look like. They're really a lot more on target to that.
We feel pretty good from that perspective. The other comments that we've made is that we see a few pockets of tightness mostly in the brokerage space, but it's not overall. I don't know what word you used to describe the market, but I would say extremely challenging market. It's just the demand is good, but the inflation side is significant. S upply, there's still plenty of supply out there. I t's a challenging freight market.
Okay. What's the customer feedback during peak season? D o you get feedback on Black Friday sales, h ow the consumer's behaving relative to what , some of your big customers might have expected?
We came here yesterday, so I haven't had customer feedback since yesterday. We just got Black Friday data points. That should generally be a positive, I would say, from a replenishment perspective. I would say too early to really comment on what customers are responding with, Darren, unless you've heard something different.
No, largely just customers have been as close to being correct about their forecast and their expectations as what we've seen in a very long time. R eally, I don't think there have been surprises. No , I don't think we have feedback that Black Friday sales were significantly going to change the way their transportation demands would work out through the end of the year. R eally continue to get feedback from customers that it's of steady as she goes and their forecast hasn't changed from what it was before Black Friday. T o me, I would love to hear that they were going to need more capacity, but at least we're also not hearing that they need less.
We were a little bit of a standout when we talked about peak during the third quarter call, so I don't know that a lot of people were talking about experiencing or planning for.
Expecting, yeah.
For a peak. W e were a little bit different, and so that might be why you're hearing other updates and maybe some surprises there. O ur customers really were pretty much in line with what they told us.
Okay. Y ou think you were maybe a little more optimistic in your commentary on peak on the 3Q?
The quote was from Spencer Frazier, that we're not expecting Christmas to be canceled. T hat that has largely played out as expected.
That's pretty good, Brad. Okay. Good. What about across the businesses, are there any noticeable differences? Something stronger, weaker, dedicated intermodal, truck brokerage?
I would say across all five businesses, just from a near-term perspective, everyone's , lifting from peak, maybe with the exception of what we're seeing on the big and bulky side and final mile. That is still a very challenging market in general, but the rest, all of our other four business units, and even in parts of our final mile services, is really seeing somewhat of a lift just from peak.
Yeah. Tom, when you look across our portfolio, and I'm going to maybe try to walk through all of them except for intermodal, let Darren comment. W hat are we seeing in ICS? G enerally you're seeing more activity volume-wise in ICS, and you're seeing that come with what you would anticipate in a more peaky environment, which is some margin compression, and we talked about that on our third quarter call. T hat is a good sign, generally speaking. S upply and demand is. Shelley said there's still plenty of supply. There is. We've talked about seeing pockets of tightness. We don't think it's tight across the entire network. T o level set those expectations, we should be seeing pockets of tightness. We're in peak season, and so Hunt's always going to be pretty conservative with our messaging.
That's a fair way of describing what we're seeing in the market. T hat's of what is in ICS, in JBT. JBT doesn't get a lot of attention, but we've been growing volumes mid-teens or, well, , healthy double digits the last couple of quarters. While overall truck volumes have been under pressure, really focused on operational excellence there, they're executing extremely well. W e are seeing a lot more opportunities come up in mini-bids. T hat's typically a sign that a customer may not be getting the service or getting capacity in a way or in a manner that they need or are accustomed to. T hat's also maybe a small sign that you're seeing some slight shifts or pockets of changes.
In dedicated, the pipeline backlog of opportunities remains healthy. We are seeing newer names come to us and get into the pipeline. W e're seeing, still a very healthy cadence of us closing deals that is within our annual guidance of, hey, we want to sell between 1,000 and 1,200 trucks of new business a year. That should generally net us about 800 to 1,000 trucks of net fleet growth. Y ou could look at the cadence of the updates we've been given each quarter. We're certainly on track to hit the numbers that we talk about on a regular basis. T hose deals are still taking a little bit longer to get the ink on the paper.
I would say that our team is executing extremely well on getting our startups to a point of profitability faster than what we have seen in maybe more historical or normal times. Shelley commented on final mile , big and bulky products going into new homes. H ousing activity , is still relatively weak. We really would love to see more activity in the housing market. T hat would be a big catalyst for demand for transportation. Darren, to the extent you want to add anything on intermodal.
I would just want to say Intermodal is the place where dialogue with the customers around how long the duration of this freight recession or depressed truckload pricing market has gone on continues to maybe even surprise the customers as much, if not more, than the carriers and the capacity providers. W e continue to find real strong opportunities to grow our Eastern Network business where customers are trying to be out in front of the potential for truckload prices to climb in whatever future point that finally does occur.
O ur customers are growing a little bit more and more nervous about what will capacity and prices do in whatever version of future you want to look for. C onverting to Intermodal has been one of the actions they can take to mitigate and hedge against that. T he service we've provided has been really, really strong and excellent, as good a service as we've ever provided in my whole career. F eel like that's been a strong part of retaining our intermodal highway to rail conversion that has been effective in our Eastern Network.
Tom, if I could just add on to what Darren said, it's a really important point. We've seen really consistent growth, particularly in our Eastern Network. When we think about where we are in this cycle, obviously truck rates are very depressed. You generally want higher truck rates and you want higher fuel prices as a catalyst to convert more highway freight to the railroads. We've been consistently complimentary of the service we're getting from our primary rail providers. T hat's creating value for our customers.
Obviously, we've been very focused on operational excellence, lowering our cost to serve. T his is a market where, as depressed as truck rates are today, we've seen healthy mid-single in some of the last couple of quarters, double-digit volume growth in the Eastern Network. T hat is where we compete most directly with truck in intermodal. I t is a true testament to the service. I t's a true testament to, well, the collective service product that both J.B. Hunt and the rail providers are performing too, so.
On the topic of intermodal, how do you think about there's some business that shifted from Norfolk to CSX, right? I don't know if that was more your discretion or BNs or mix of both. D o you tend to be indifferent? L ike Brad, like you were saying, all of your rail service providers are doing well. H ow do we think about the preference to J.B. Hunt, the impact to J.B. Hunt? Y ou got great customer relationships, so you probably keep the business regardless. I don't think it's very clear to investors of this good, bad, and different.
Let me first start by, we have two Eastern rail providers for a reason. We like to have both of CSX and Norfolk Southern. They both do things really, really well. T hey both do things that the other one doesn't do. S o that gives us a lot of strength in our network to have access to both. You referenced the share shift. Look, BNSF had been discussing plans to change the way they connect for Charlotte and Jacksonville for some time. That discussion was going on well before there was any a merger discussion. T hat was starting and stopping. C ertainly, t he merger that was the intent to try to merge was announced at the end of July.
That sped things up. BNSF made a decision for the routes from Los Angeles to Charlotte and Jacksonville to change the way they connect with CSX. We certainly weren't a cheerleader to do that. We weren't also necessarily saying absolutely not. W e need to be careful. We need to be good partners with BNSF. They weren't going about that change purely because of a potential for a merger. They were going about that change for some efficiency work that they were trying to accomplish and just expanding what they did with CSX. T hey felt like pre-merger that was a good opportunity. Now, I also want to be loud and clear that transition occurred early in September. That is the only transition of share that has moved J.B. Hunt volume. We don't have any intent.
We're not out trying to work on transitioning market share from Norfolk Southern to CSX. That's not part of our daily effort, and we don't have anything in the works. The re are a number of announcements that seem to be coming out from certainly BNSF and CSX over ways that they can work together. To the extent we have business that's moving on both BNSF and CSX and the new service could complement or provide an opportunity for us to grow, we'd love to do that.
W e're not actively looking for ways to shift business from one railroad to another. We are actively looking forward to CSX's opening of Howard Street Tunnel for double-stack clearance into the Northeast and can see that as an opportunity for us to go attack highway to rail conversion and look for ways to grow. That's where our focus is at. We maintain really strong relationships with all of our rail providers. T o the extent we can help them achieve goals in growing, and share with them our customers' feedback, that's where our focus is at.
Tom, the one thing that's important, J.B. Hunt's goal is not to take or move share from one to the other. J.B. Hunt's goal is to grow the market and take share from the highway. T hat's what we work with the rail providers on. Hey, how do we take more traffic off the roads? How do we improve safety on our roads? How do we reduce congestion on our roads? And how do we bring more volume to your network? And do so by working with them on OD pairs and transit times and all of those things.
W e've said this many times, we've been on $120 billion worth of freight a year. We have a lot of visibility to where freight originates and where it is destined to. We use that information to help inform ourselves as well as our rail providers on where we think there are opportunities for us to grow together.
How is there any way you can frame, Darren, like the comment on Howard Street Tunnel? Like if you just looked at the Eastern Network alone, is this like 10% of lanes in the east that opens a new opportunity for growth for J.B. Hunt? Is it like, I don't have a good sense of how meaningful of an opportunity.
Okay. I don't know how to frame it as a percentage. The one thing I would say is if we look at our Eastern Network lanes that we do the heaviest lanes are Chicago to, call it, Harrisburg, New Jersey, Chicago-Atlanta, and then Atlanta back to New Jersey. Those three corridors are really a heavy chunk of what happens in the Eastern Network. U p until the Howard Street Tunnel opened, CSX wasn't able to offer Atlanta to New Jersey, Atlanta to Philadelphia service.
And so we look forward to that opportunity and certainly can understand the value in additional capacity in one of the three largest lanes that we operate. T hey can certainly gain even better opportunities down into Florida. T heir route may even go all the way up into Massachusetts. T hat's a place where the Norfolk Southern route actually doesn't go. W e just look forward to having optionality, to have competition and know that there's additional capacity in the lane and feel like that'll be a good opportunity for us to create value for our customers and grow highway to rail conversion.
Right. I t's not necessarily a new market, but you got a new player that can participate well. T hat creates more opportunity for.
Yeah. With the exception of going up and beyond to Massachusetts, that could really be a significant opportunity, you bet.
Okay. You've talked about , the cost program, and that's been something that , you've worked on cost through the downturn as a strong management team would do, right, but this is a little more focused, the $100 million program. Can you give us some thoughts about how big of a change is this for J.B. Hunt? J.B. Hunt, I always think of historically as very growth-driven. That's very much the culture, right, and a lot of success with that. This seems like a little different component you're adding, so maybe just if you could offer some thoughts on , that program, is there a lot more to go beyond that? How do we think about it?
Let me just start. Brad, I'll let you. We are still a growth company. We're a disciplined growth company. F or us, as we have looked at the last three and a half years, growth has been very difficult because of the current environment. We, Brad says this a lot, really know how to grow. I don't know of any company that knows how to shrink or be smaller than what they were. It's always a challenging environment for us. We've been working on cost really since the recession hit three and a half years ago. We did all the things. O ne of the steps that we took that is really going to pay long-term dividends for our shareholders is we didn't do any mass layoffs.
We did a great job managing through attrition and through performance management. We reduced our workforce by 15%. W e went about it a little bit different way, but we were actually able to achieve it. T hat's created a level of safety for our people to understand that when you bring new ideas to us, even if those new ideas might create more efficiency in your work and could eliminate part of your team, there's still going to be a really great place at J.B. Hunt's. W e've been working on costs. W e made a pretty big change there at the beginning of this year, really after tariffs got put in place. Our customers started telling us, "We don't know what we're going to do." Some were putting pauses on their shipments.
It was like, "Oh no, we're going to go through another really difficult year." We really put in motion, "Listen, we need to be offensive. W e can't wait on something to turn. We've got to lower our cost to serve. That will allow us to compete more in the market and really grow with our customers and return margin back to our shareholders," and so that really stuck in the mind of our people of what does that mean and how do we need to do that, and so, Brad, maybe I'll let you talk about how we attacked both that and business transformation.
Yeah. T here's really been two elements to the initiatives we launched earlier this year that Shelley was referencing. Lowering our cost to serve. W e really scrutinized a lot of the ideas that in terms of the process where our executives went around to different areas of the business, thought more instead of vertically, thought more horizontally across the org, how are these areas impacting us from a cost perspective? Where are our opportunities? T he scrutiny really came on, are we identifying these cost opportunities as something that's structural or temporary? What we really targeted, and think of all the costs that hit our P&L, what we've identified is $100 million of structural costs. W e've said that these aren't volume dependent. These are costs we think, regardless of the environment we're in, we think we can permanently remove from the business.
That leaves plenty of opportunity for a lot of other productivity and volume-driven efficiencies that can come that are maybe outside of what we've identified as structural. T he second part of that process that Shelley alluded to was business transformation. W here can we look at the design of a process from origin to destination? And how do we think about redefining that process? Where can we introduce technology maybe to improve efficiencies? But the distinction between lowering our cost to serve on the structural side versus this business transformation is there is an element of scoped engineering and technology work, or there is some investment that we have to make to go achieve some of these benefits. T hat has to go through a fairly rigorous underwriting process internally to generate the returns that would be satisfactory for our hurdle rate.
We have, I would say we've done a really good job, obviously evidenced by Q3. I actually think evidencing Q2, W e were well on our way on this lowering our cost to serve journey in the second quarter. W e've proven we've done a good job out of the gate on the cost side. T he opportunities on the forward look is how do some of these business processes being reimagined with the benefit of technology, automation, where do those opportunities come to fruition and help us drive efficiency and put us in a good spot for the eventual recovery in the freight cycle, which it's a matter of when, not if, right, Tom?
That's right. It's coming soon.
We've been saying that for how many years?
Which is exactly why we really said an offensive lower cost to serve, really grow a map of our customers. T he other thing is we've identified the $100 million that we shared. Our internal targets are much greater than that. W e know that we still have inflation that we're trying to offset. A ll of those things, we came out of the gate pretty strong in third quarter, but a lot more work to do.
How do I think about the way that could flow through the P&L? W hen we look at the numbers QQ and then even more so 3Q, we saw a significant improvement in Purchased Transportation. T hat seemed to be the bigger impact. I know we don't have full visibility to , how the numbers show up in the categories. I s that going to remain the place where you have the bigger impact? Or do you think it broadens out to show up in other comp and benefits or other lines in the P&L?
You're probably referencing some of the segmented information, maybe making reference more to intermodal with that question. Is that fair? T he one thing that's largely missed, and Darren, you may want to address this. W e break down the P&L by segment, but it really doesn't necessarily give you a lot of insight into what I'd consider to be our Transcontinental network versus our Eastern Network. W hen you've seen as much of a shift in the growth in our Eastern Network, and our volumes were down, Darren, 6% in Transcontinental.
PT certainly makes up a lot larger percentage of our overall cost structure in transcontinental than it would in local east. W hat I would tell you is what you would see is that there was really great cost work across all line items on the P&L. T hat maybe some of that mix shift between transcontinental and Eastern network probably makes that a little bit less visible in light of how much of that mix shift has played out in the last two quarters.
Certainly, that's an area that would show up where we've worked intentionally on our balance. T hat wasn't necessarily part of the $100 million cost effort that we talked about on the Q2 earnings call. A s we came into the year, we really wanted to improve the way we balanced the equipment. A bout while we were effective at getting price improvements in our head-haul markets, we also had a reduction in how many empties we were moving and really feel good about the direction we're going there.
Beyond that, we've also that PTE line in the intermodal P&L that you can see; it's inclusive of fuel. It's inclusive of the purchase transportation expense associated with outsourced dray; it's also in that line. T here's a lot of moving pieces in there. That's not where I would focus my attention. We're going to certainly be working on driver productivity, productivity of our assets. How do we drive better tractor productivity on the dray fleet? Those are how do we drive out empty miles in the drayage system? Those are the places that our cost initiatives are beginning to really show up.
The focus price on the head-haul lane and utilization on backhaul was not a part of that $100 million program. That was separate improvement.
That doesn't fall into the bucket of volume dependent, right?
H ow much of the $100 million run rate did you get to in 3Q? Were you at the full run rate or how far?
What we said publicly is greater than 20%. O n an annualized basis, $80 million of $100 million. A s Shelley just alluded to , obviously, Tom, how long I've been around the transportation sector and even in a seat similar to yours at various points in my career. I've heard a lot of cost initiatives being discussed by management teams before and quarter after quarter don't necessarily see the proof in the pudding. W hen J.B. Hunt says something, and we say this over and over, we have a say-do culture.
When we say something, we do it. When we came out to publicly announce a $100 million cost initiative, we wanted to make sure we weren't just telling people it, that you could see it in our performance and in our results. Again, we're one quarter in. W e did a really good job of executing on that cost initiative. S ure, we're 80% there if we annualize everything we did in Q3, we would be 80% done with our $100 million cost initiative. L ike as Shelley said, our internal target is something that's a lot bigger than that.
Even though you're 80% there on the piece you identified, there's still some nice runway left to keep building as you go in 2026. Okay. Great. Thank you. How do you think about freight outlook for 2026 and t he algorithm for J.B. Hunt in 2026? O bviously, I know Brad's not going to bite on giving guidance.
Giving guidance.
Ever. I'm sure he won't for 2026 either. J ust high level, are you optimistic that intermodal volumes can grow? Are you optimistic you can get that 3%-4% price? It's been elusive the last couple of years. J ust high level, what do you think is maybe a base case or a more likely case?
I'll take a shot at this and let Shelley or Darren clean it up. I'm optimistic that when you think about our organization, we've been very focused on operational excellence, and so regardless of what the market presents us and how we have to compete, I am confident that J.B. Hunt can deliver very strong value for our customers and win in whatever that market may be. That's in intermodal, that's in dedicated, that's in highway, that's in final mile. A cross all of our portfolio of services, we offer very unique value that is very hard for a lot of our competition to replicate. Now, when about how are we set up really well, regardless of what the environment looks like, we've just proven, at least through one quarter, we've been really good at executing on lowering our cost to serve. W e've seen really good operating leverage in the business.
We saw nice improvement, for example, in intermodal volumes Q2 to Q3. There was a large percentage of that incremental business, that incremental revenue that fell to the bottom line because of the cost discipline. T o the extent that the environment presents us opportunities for growth, that will show very nicely on our profitability. Th at that operational torque or operational leverage will show well in an environment where we're recovering. F inancially, our leverage is still quite conservative, but we were even more conservative. A s we create value, obviously, that value is going to accrete to our shareholders. W e've reduced our share count by , around 7.5% over the last 24 months.
We're in a position where we're long in the tooth of this freight recession, even though I swore I was not going to use that word anymore. We're generating very strong free cash flow. Th at we've been clear. We think our maintenance CapEx is somewhere around $700 million, and we're generating free cash flow well in excess of that. W e've been returning that to shareholders. We've maintained investment-grade credit rating. We've supported, our dividend has been growing for 21 consecutive years. Y ear to date, we've bought back $728 million worth of stock. I don't see a lot of incremental capital needs for supporting our growth next year other than what we might see in our dedicated business. K eep in mind, any capital we deploy there is success-based.
We get typically long-term contracts with fixed and variable pricing dynamics, annual price escalators linked to ECI, CPI. W hen I go deploy capital in that business, I feel very comfortable with the ROIC that we underwrite these deals to, as well as the tenure of that capital being tied up for five years and certainly liking the risk-adjusted return we see on that capital being deployed. W e're set up really well financially. We're just not waiting for the market to turn. Clearly, we're trying to make our own story and make it a little bit unique. W e've just added a little bit more torque to it with some of the cost initiatives we've been able to execute on.
If I translate that a little bit, that sounds like even if your freight environment is flat, hopefully it's better. I f your freight activity is flat, J.B. Hunt's got some idiosyncratic drivers, and you've given us evidence of execution. Y ou could potentially improve margin, grow earnings. Not saying a lot, but you could see some of that with the levers you control. Is that , it's not real specific, but it's.
I did a really good job of answering a guidance question like in a very long, elaborate way without providing guidance, and then the follow-up question is to give the guidance. I feel confident that this team is set up to win regardless of what the environment is. I just don't know what winning will look like in 2026, but I feel like we're set up well.
Okay. Shelley, what are your thoughts on , you're close to customers, have worked with customers a long time. What do you, how do you think customers are feeling about next year? What's your sense of risk management? Will they be willing to pay you more price because you're a high-quality provider that can bring capacity to bear and regardless of regulatory pressure?
Yeah. One thing we've really worked hard on over the last two years is operational excellence in both service to our customers and safety performance. T hat takes time for that to really start to be recognized from a safety perspective. We're in our third year of our best year. W e had our best year in 2023, reducing our DOT preventable accidents per million miles by 25%. We beat that in 2024 and we begin in 2025. R eally doing a great job operationally, have the entire company focused on that, including the way we're compensated. S afety, a big critical component. P art of that's because what's happening, one, it's good for business, but two, what's happening in the insurance market. T he best way for us to really control our costs is to reduce and eliminate accidents.
The second during this downturn has really been on how we focused on our customers, and so we can focus on getting offensive with our customers also, making sure that when we're talking with them, they have the best service across the board. You heard Darren talk about it. It's the best in his career in intermodal. I would tell you it's the best in the company for all five business units, so very focused in with our customers on how do we solve. Y ou saw some separation start to occur for us in the third quarter from a market share gain perspective, so we talked about in the market, the data we see that the market actually got worse as the quarter progressed, but actually our volumes did not.
That's our operational excellence and really driving value for our customers that are helping us. The other thing that Darren did a nice job of this year was taking rate increases. T hose were very difficult. W e were it was a lot of hard work for the little bit of price that we got. O ur customers did a nice job helping us think through what could we do differently. Darren did some work around how could we take costs out of the system on some of the freight that you moved. T hat's been good. All that to say is we're leading into 2026. O ur customers somewhat feel sorry for us because they get it. They get how long it's been.
I've never met a customer that felt sorry enough to just sign over a rate increase without really good reasons for that. T he market has to respond to that. O ur customers, there's a little less uncertainty around tariffs. They're a little more settled there. T hat's a good thing going into 2026. A s we think about 2026, we were talking as a management team Monday. T he new tax laws will be in place and there'll be refund checks. T o whatever extent that creates more demand in goods, that could be better for our business. R etail sales were good. That could be better for our business.
It's going to be really hard to hear us say after three and a half years that we think 2026 is going to be a really great year. T hings could get a little bit better. W e're really planning on where we are today. We're focused on operational excellence, lowering our cost to serve so we can grow with our customers. If things get a little better from a demand perspective, that's going to drop to our bottom line because we're pre-funded on growth.
We have all the capacity that we need in intermodal to serve our customers. T hat will help us. A lso, if it gets a little bit tighter from a regulation perspective, that's going to be helpful to us as well. R eally planning on this base case scenario. If either one of those happen, that's just going to be a great benefit for us, but also for our customers.
Just for the benefit of the audience in the room as well as online, our unwillingness to really get optimistic about 2026. We've tried to call it before and we've been wrong. W e're out of the business of looking at the crystal ball and trying to read too much into it, but like I said, control what you can control. T hat was Shelley's message and execute, and at the end of the day, we're in a really good spot financially, and how we can deliver value for customers.
Shelley, you mentioned regulatory factors. You want to give us your view on what's the likely way that this plays out? W hen I talk about it with companies brokers, carriers, whoever, they're like, well, enforcement's the key. T here is evidence that there's some impact, but hard to say there's a broader-based impact so far. W hat's your view about the likely path for this regulatory pressure on drivers and questionable capacity?
I don't think I have a different view. Enforcement is going to be key. We did write a white paper. It's available on our website. It just gives you the data for what it is. T hat's important that we educated our customers so that they understood what potential impacts could be coming so that they are prepared and ready. A gain, we're going to be more cautious than not about how fast regulation will really take hold and how much that will be enforced. C ertainly that's up to 400,000 drivers that could be impacted. I would say that's up to two years from now. W e'll wait and see, again, planning on more of a base case.
You think your broader estimate is 400,000 drivers that could be impacted by the regulatory variety of regulatory initiatives? Okay. When we say enforcement is key, is that weigh stations, roadside stops, ICE. I t's probably everything, but what are the key elements that we should consider for?
Well, it's state by state. Y ou do have to think about enforcement state by state, but think about anywhere that somebody could be placed out of service or double-checked. T hat takes time. There is some evidence that there's work going on as we speak by state. A gain, there's still a lot of capacity in the market. T here needs to be a takeout of some capacity and that be more rationalized or demand go up significantly. T here's still some room for that to really play out.
How many states do you think are seriously focused on enforcement and how many states? How could that number get?
All states will be focused on a level of enforcement. To what level, I don't know. W e've heard good evidence in several states. I would say there's no real rhyme or reason as to why the state has or hasn't done it. T hat gives me confidence that there'll be some level of enforcement.
Okay. We're just about at the end of time here, but is there anything I didn't ask about or you didn't talk about yet that you want to share? Aside from guidance. Hold off on that.
One thing I would say is we've been. Darren and I have been with the company 31 years. We've seen a lot of change and a lot of movement in our industry, but one thing we've done organizationally is really positioned our company for the long term and to be able to win like crazy, and so I looked at our financial performance in the third quarter, one of our best third quarter performances really ever.
It was our third best third quarter in operating income, and that's in this challenging of a market. I'm excited that we've already pre-funded our growth, that we're prepared and ready, we're operationally excellent, and that lowering our cost to serve is a big mantra inside our organization, and that really hits back home to our customers. I'm more excited today than I have been about our future. Having said that, we'll wait and see what 2026 delivers for us.
Thanks for having us.