ArcBest saw revenue fall again during May in its asset-based unit, which includes less-than-truckload services. Shipments and tonnage were up slightly year over year (y/y) but yield was off by 12%.
The segment is more broadly utilizing a dynamic pricing model, which uses technology to better align rates to available capacity on a lane-by-lane basis. The tool is helping the carrier keep its network full during the current downturn by taking on more transactional shipments, however, pricing on that business is often less advantageous.
ArcBest (NASDAQ: ARCB) reported a 1.3% y/y increase in tonnage during April, which was followed by a 2% increase in May. The changes were driven by higher shipment counts in each month, which were partially offset by lower shipment weights.
“The slowdown in the general economy has impacted customer order quantities and resulting shipment sizes compared to May 2022,” stated a Friday filing with the Securities and Exchange Commission issued prior to the market opening.
Extrapolating the quarter-to-date growth rates through the entire second quarter, the unit’s shipments would be flat compared to the first quarter with tonnage up approximately 7%.
The update said the dynamically priced transactional LTL shipments were profitable in the period and helped offset softer demand from its core, contractual accounts.
Revenue per hundredweight, or yield, fell 10.3% y/y in April and was off 12% in May. Revenue per shipment was off by a slightly higher percentage in the period.
The falloff in yield so far in the second quarter is steeper than the 4% y/y decline booked in the first quarter. Both quarters faced tough prior-year comps, with the first quarter of 2022 (up 21.1% y/y) seeing a tougher comp than the second quarter of 2022 (up 17.7% y/y).
Shipments with dynamic pricing as well as lower fuel surcharges weighed on yields in the period. Average weekly diesel prices were down roughly 25% y/y in the first two months of the second quarter. However, lower shipment weights were a modest tailwind to the yield calculation.
“The pricing environment continues to be rational,” the update read, noting pricing on core LTL business was up by a mid-single-digit percentage y/y (excluding fuel) in May. The company previously disclosed that yields on core accounts were up by a similar percentage in April. By comparison, those accounts produced a high-single-digit yield increase in the first quarter.
The company announced Thursday its chief yield officer was stepping down after six years in the role.
Total revenue in the unit was down 9.1% y/y in April and 10% lower in May.
Looking forward, ArcBest has some tough tonnage comps ahead. It’s facing a plus-7% comp in July and a plus-8% comp in August before easing occurs in September (negative-1.3%), which is when the LTL market rolled over last year. Additionally, ArcBest’s comps aren’t as easy in the fourth quarter as that of some competitors.
The LTL industry could use a boost from the domestic manufacturing complex, which produces two-thirds of some carriers’ total freight, but data from that segment of the economy shows activity continues to slow.
The Manufacturing Purchasing Managers’ Index remained in contraction territory for a seventh straight month in May. A 46.9 reading was 0.2 percentage points lower than the April reading and remained below the neutral threshold of 50. Components like new orders (42.6) and order backlogs (37.5) were notable detractors in the month.
ArcBest also reported continued revenue declines in its asset-light business, which includes brokerage. Revenue per day was down by mid-20s percentages y/y in both April and May. Shipments were up 2.4% y/y in April and 4% in May, but revenue per shipment was down roughly 30%.
The revenue declines were largely unchanged from the 26% y/y drop the segment recorded in the first quarter.
Truck brokers across the industry have seen weaker results as volumes remain subdued and pricing depressed. Freight broker Landstar System (NASDAQ: LSTR) recently lowered its second-quarter outlook as it didn’t see the seasonal uptick in May it was expecting.
Shares of ARCB were off 2.3% at 11:53 a.m. on Friday, in line with declines seen in shares of other LTL carriers. The S&P 500 was up 0.2% at the same time.