UPDATE 1-J.B. Hunt shares tank as higher trucking costs prompt CFO's warning on possible profit drop

Shares of J.B. Hunt Transport Services dropped 11% on Wednesday after the trucking firm's finance chief warned of a sequential drop of 5% to 10% in third-quarter profit.

Higher transportation rates, which included a rise in diesel prices and driver rates going into the peak holiday season, have drastically raised costs for the company, CFO Brad Delco said at the Morgan Stanley Laguna Conference in California on Tuesday.

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Shares of other trucking companies fell between 0.6% and 3%, with Expeditors International of Washington down the least and Knight-Swift down the most.

Here are more details:

* J.B. Hunt gets about 50% of its quarterly revenue from the intermodal segment, where goods are shipped through two or more modes of transport.

* However, a two-quarter lag in intermodal prices catching up with costs left the company struggling to keep up with higher expenses in its trucking business.

* Baird analysts said the warning shows the company was "slower than they should have been" to raise rates, while being "overly reliant" on reducing operating costs.

* The company forecast about $25 million in additional driver-hiring costs in the third quarter, compared with the second quarter, while fuel costs are expected to rise by at least $10 million.

* Transport firms this year have battled rising fuel rates, driven by the Iran war, by passing them on as surcharges to customers.

* The industry has also faced an acute shortage of skilled drivers after Washington's move to bar non-citizens from applying for commercial driver licenses.