Transportation and logistics provider ArcBest reiterated the third-quarter margin outlook for its asset-based unit but raised expectations for its asset-light segment Tuesday after the market closed.
ArcBest’s (NASDAQ: ARCB) asset-based unit, which includes less-than-truckload subsidiary ABF Freight, reported a 9% year-over-year increase in revenue per day for August. That was a slight acceleration from July’s 7.7% y/y growth rate, but diesel fuel prices were up 46% y/y in August versus a 31% y/y increase in July. (Diesel prices were up 10% sequentially from July to August.)
The August revenue increase was due to a 9% y/y increase in tonnage, with no change in yield (inclusive of fuel surcharges). Excluding fuel, yield was down by a low-single-digit percentage during the month. The carrier’s mix profile now includes heavier shipment weights (+14% y/y in August), which are a drag on yields, but typically accretive to margins. Improved demand across the industrial complex and tight supply conditions in the truckload market are driving up shipment weights.
The Institute for Supply Management’s Manufacturing PMI remained in expansion territory for an eighth consecutive month in August. The 54.6 reading was 100 bps below the four-year high set in July. (A reading above 50 signals expansion, while one below 50 indicates contraction.)
The new orders subindex—an indicator of future activity—fell 3 points but remained in growth territory at 53.7. Carrier tonnage typically lags the index by three months.
ArcBest’s shipments fell 4% y/y in August, but revenue per shipment was up 14% y/y due to the higher weights and fuel surcharges. The increase in weight per shipment pushed its two-year-stacked tonnage comps to a cycle high, up 11.4% in August following a 9.4% increase in July.
(All reported metrics showed higher growth rates in August than in July on a two-year comparison.)
The company previously disclosed that contractual rate increases averaged 5.8% in the second quarter (up 9.8% on a two-year-stacked comp). It also implemented a 5.9% general rate increase for LTL services in both of its business units on June 22.
ABF typically sees no meaningful sequential change in adjusted operating ratio (inverse of operating margin) from the second to the third quarter. The August update reiterated management’s flattish guidance, which implies 170 basis points of y/y improvement.
Asset-light outlook moves higher
The asset-light segment, which includes truck brokerage, is now expected to record adjusted operating income of $10 million to $12 million for the third quarter, which is an increase in management’s initial guidance of $6 million to $8 million.
“This outlook reflects continued yield discipline and ongoing productivity improvements across the business,” the filing said.
These initiatives pushed total shipments per person per day 35% higher y/y during the second quarter.
The unit saw daily revenue increase 26% y/y in August (+27% y/y in July) as shipments were flat y/y (+7% y/y in July) and revenue per shipment jumped 26% y/y (+19% y/y in July). The acceleration in revenue per shipment was mostly due to higher fuel prices. Purchased transportation costs eased 60 bps from July to 85% of revenue in August.
Why it matters? ArcBest is one of a few publicly traded LTL companies. Its mid-quarter results provide insight into a subsegment of trucking where few public datasets exist.
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