ArcBest Reports 31% Earnings Gain Despite Revenue Drop
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The Fort Smith, Ark.-based logistics company posted net income of $48.8 million, or $2.01 per diluted share, for the three months ending Dec. 31. That compared with $37.3 million, or $1.45, during the year-earlier period.
Revenue decreased by 6.4% to $1.09 billion from $1.16 billion.
“2023 was a special year as we celebrated our company’s hundred-year anniversary,” ArcBest CEO Judy McReynolds said during a call with investors. “This extraordinary milestone reflects our resilience, innovation and customer focus, and we recognized this accomplishment with events and programs throughout the year, including supporting our communities.”
ArcBest ranks No. 12 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
For the full year, ArcBest reported net income from continuing operations of $142.2 million, or $5.77 per diluted share, on revenue of $4.43 billion compared with net income of $294.6 million, or $11.55, on revenue of $5.03 billion in 2022.
ArcBest completed the sale of its fleet maintenance and repair services subsidiary FleetNet America during Q1.
“Despite a slower freight market, ArcBest delivered solid fourth-quarter and full-year results thanks to our diverse portfolio of solutions, our investment in technology and innovation, and our commitment to operational excellence,” McReynolds said. “We continue to serve as trusted advisers to our customers, helping them navigate a complex and evolving logistics landscape with our integrated service offering and century of experience.”
ArcBest also implemented cost-cutting measures that improved the asset-based operating ratio in the third and fourth quarters. The company is expecting those measures to be even more beneficial as the market recovers. It also accelerated its service center expansion plans to increase asset-based capacity and finalized a five-year labor agreement in July.
“We better aligned our business with our growth strategy by selling FleetNet America for $100 million,” McReynolds said. “We launched the Vaux freight movement system, which was recognized by Fast Company and Time as one of the year’s best inventions. And we invested in our business while also returning over $100 million to shareholders through dividends and share repurchases.”
The quarter results were mixed in terms of Wall Street expectations. Analysts were looking for $2.19 per share and quarterly revenue of $1.08 billion, according to Zacks Consensus Estimate.
Asset-based segment revenue decreased 0.2% for the quarter to $710 million from $711.4 during the 2022 period. But operating income increased 16.5% to $87.5 million from $75.1 million the prior year. The report noted that daily revenue was only slightly below the prior-year period despite the softer freight environment leading to reduced customer demand. It attributed the resilience largely to its disciplined approach to pricing and its strategies to help customers navigate market disruptions.
Total daily shipment and tonnage levels during the quarter were below the prior-year period. The report noted that a shift in freight mix toward less-than-truckload services positively impacted the asset-based freight-handling metrics and operating results. This drove asset-based billed revenue per hundredweight to increase approximately 7% over the prior year. The report added that cost control actions that were initiated in Q3 also positively contributed to the asset-based operating ratio.
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Asset-light segment revenue decreased 13.7% to $413.4 million from $479.1 million during the 2022 period. The segment also experienced an operating loss of $7.7 million, compared with an operating loss of $11.3 million the prior year. The results were impacted by lower revenue per shipment and reduced margins associated with changes in business mix and the soft rate environment. Total shipments grew by 12.4% per day, but lower rates and margins for the truckload solution were the biggest drivers of reduced profitability.
TD Cowen noted in a report that the adjusted earnings per share of $2.47 handily beat its estimate of $2.22. The investment bank and financial services company also noted that the asset-based revenues were roughly flat year-over-year, which slightly beat its estimate on pricing recovery. It also noted the company continues to improve its business mix while pivoting out of its transactional services.
“[Fourth quarter] came in above our forecast and consensus expectations as asset-based margin improvement drove outperformance due to cost initiatives, strong core pricing gains and improved business mix,” Cowen analyst Jason Seidl wrote in the report. “2024 will be an investing year for ARCB,” he continued, noting the company is adding about “350 new doors to its terminal network ahead of an eventual rebound in demand.”