Transportation and logistics provider ArcBest reported Friday that the robust revenue growth trends in place for several quarters now have continued through February.
The company’s asset-based division, which includes LTL, reported a 24% year-over-year jump in revenue during the recent month, following a previously disclosed 22.4% increase in January. The year-over-year comparisons were similar to those booked during the 2021 fourth quarter, which was a record earnings period for the carrier.
The LTL industry is benefiting from tight capacity dynamics as e-commerce networks expand and the industrial complex continues to see growth (Manufacturing Purchasing Managers’ Index logged its 21st straight month of expansion in February). Pricing continues to move higher, a combination of contractual rate increases (roughly up 10% across the industry), heightened general rate increases and higher fuel surcharge revenue (diesel prices have spiked 38% year-over-year on average in 2022).
ArcBest’s (NASDAQ: ARCB) topline increases in the first two months of the first quarter were driven primarily by higher yields. It reported a 19% year-over-year increase in revenue per hundredweight, or yield, in February (up 19.9% in January). Tonnage was 4% higher in the month (up 2.1% in January).
The company has been accepting fewer transactional shipments in efforts to make sure it has the incremental capacity needed to service its core customers. Shipments were down roughly 1% year-over-year in both months but heavier shipment weights led to the tonnage increases.
However, among its core LTL customers, tonnage and shipments increased by a high-single-digit percentage in January and by high-single to low-double-digit percentages in February. The monthly sequential changes to start 2022 were “some of the best in the last 10 years,” a filing stated.
The selective approach to providing capacity has allowed ArcBest to raise yields significantly as revenue per hundredweight was up nearly 30% on a two-year stacked comparison in February.
Asset-light provider Forward Air (NASDAQ: FWRD) has also been taking a more discerning approach to disseminating its resources.
The company announced Friday that revenue per shipment was up 52.5% year-over-year through the first two months of the quarter in its expedited segment, which includes LTL, TL and final mile. Tonnage was up 10.7% and yield increased 16.1%. The company has been purging lower-margined freight from its network in favor of heavier loads tied to the medical and industrial technology verticals. Shipment weights were up 28.7% in the period.
ArcBest said the February growth rates were not aided by network outages caused by multiple severe winter storms last year. “For the second year in a row, the effects of winter storms had an unusually high impact on our asset-based network relative to what is normally expected in the first quarter.”
By comparison, competitors Old Dominion Freight Line (NASDAQ: ODFL) and Saia (NASDAQ: SAIA) reported large year-over-year spikes in volumes during February, in part due to the weak February 2021 comp.
Revenue in ArcBest’s asset-light segment, which excludes results from maintenance and repair unit FleetNet, increased 142% year-over-year in February following a 135.5% jump in January. The results include the November acquisition of TL broker MoLo. The division is seeing higher purchased transportation expenses as well. As a percentage of revenue, purchased transportation costs were 86.1% in January and 85% in February.
ArcBest raised its long-term financial targets in conjunction with its fourth-quarter report.
The new guidance calls for consolidated revenue to potentially double by 2025 to a range of $7 billion to $8 billion. Operating margins in its asset-based segment are expected to increase to a range of 10% to 15% (higher than the prior guide of high single digits) and asset-light operating margins are expected to be in the 4% to 6% range.
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