ArcBest posts flat-to-down results in main units; LTL slowdown, loose truckload capacity weigh

Mark Solomon

5 years ago

Less-than-truckload (LTL) and asset-light provider ArcBest (NASDAQ:ARCB) said late Tuesday, July 30, that second-quarter revenue came in at $771.5 million, down $22 million from the year-earlier period. The company said it managed through the dual impact of a slowdown in LTL activity and slack demand for its expedited asset-light services in the quarter as a loose truckload capacity landscape reduced shipper need for alternative options to get goods to market.
The Fort Smith, Arkansas-based company reported net income of $24.4 million, or 92 cents per diluted share, compared to $24.6 million in the 2018 quarter, or 93 cents per diluted share. Excluding certain items in both periods, net income in the 2019 quarter dropped $5.2 million year-over-year. The company took a one-time, $28.2 million after-tax charge in the 2018 quarter for restructuring the pension obligations of its unionized ABF Freight LTL unit.
The company’s earnings per share came in $0.01 per share under analysts estimates, according to data on Seeking Alpha, a financial website. Revenue was light by about $7.5 million, according to Seeking Alpha.
ArcBest’s asset-based unit, ABF Freight, posted virtually flat year-over-year revenue at $559.6 million. Daily tonnage fell 3.4 percent, daily shipments dropped 1.2 percent, while weight per-shipment declined by 2.2 percent, ArcBest said. Revenue for each 100 pounds hauled, a key measure of LTL profitability, rose 4.1 percent year-over-year due to a lower average shipment weight. The unit reported $36.2 million in operating income, down from $41.3 million in the second quarter of 2018.
Operating ratio, the ratio of revenues to expenses and a measure of a carrier’s operating efficiency, dropped to 93.5 percent from 99.4 percent. That meant the unit spent 93.5 cents for every dollar in revenue last quarter.
ArcBest attributed the unit’s slight revenue gains to improved yield management, which neutralized the impact of declines in shipments and tonnage. Gains in truckload spot market demand did not completely offset the reduction in daily LTL tonnage, ArcBest said. The unit also absorbed higher costs for city pickup, dock-handling and “final shipment delivery” services, ArcBest said.
The company reported a 14 percent drop in revenue in its asset-light business, with a $1.6 million drop in operating income and a $2.2 million decline in adjusted earnings before interest, taxes, depreciation, and amortization, or EBITDA. More available truckload capacity, particularly compared to the 2018 second quarter, weighed on volume and pricing.
Judy R. McReynolds, the company’s chairman, president and CEO, said economic conditions moderated in the first half of the year, a trend she sees continuing through the balance of 2019. Nonetheless, she called the results “solid,” adding that LTL pricing remains “rational.”