This hairy critter is the second larval stage of the walnut caterpillar, a sometimes serious defoliator of walnut, pecan and hickory trees.
Walnut caterpillars stay together after hatching, feeding as a group on the leaves of the host trees. Larvae in the first stage are dark red with white stripes along the length of the body; they typically skeletonize the leaves. The second stage eats the whole leaf, including the petiole.
In some parts of the country, walnut caterpillars rarely have a significant impact. In others, including Texas, they're considered serious pests, causing damage to not only nut trees but also oak, willow and some other woody shrubs. There, two generations of walnut caterpillars per growing season, and the second is usually larger and more problemtaic. Chemical controls — spraying the early stage and instars — is considered necessary.
When disturbed, walnut caterpillars arch their front and back ends in a defensive posture, emitting a chemical that's considered irritating to the caterpillar's usual predators.