ArcBest’s Q2 a step on path to recovery

Some freight lost to a depressed truckload market has returned as TL spot rates have climbed. This is driving average shipment weights higher. ArcBest is capturing low-double-digit rate increases on TL shipments.

Revenue per hundredweight, or yield, was 4% higher y/y. Gross yield growth was supported by higher fuel surcharge revenue (diesel prices were 50% higher y/y in the quarter). Excluding fuel, yield was flat y/y, but the higher shipment weights were a drag on the calculation. Yield (ex-fuel) was up by a low-single-digit percentage from the first to the second quarter.

The heavier weight profile in July (shipment weight up 11% y/y) pushed yield down 1% during the month (down by a low-single-digit percentage excluding fuel).

Contractual rate increases averaged 5.8% in the period (up 9.8% on a two-year-stacked comp).

ArcBest implemented a 5.9% general rate increase for LTL services in both of its business units on June 22. This year’s GRI was six weeks ahead of the 11-month cadence the company has followed over the past few years. The increases can be tough to pass through in soft markets but management said the latest rate hike is “holding very well.”

The asset-based unit booked a 90.8% adjusted operating ratio (inverse of operating margin), which was 200 basis points better y/y and 650 bps better than the first quarter. The result was in line with management’s guidance for 600 to 700 bps of sequential improvement. The company is calling for no material sequential change to adjusted OR in the third quarter, which is in line with historical seasonal patterns. (The outlook implies 170 bps of y/y improvement.)

Asset-light turning the corner

The asset-light segment, which includes truck brokerage, reported a 28% y/y increase in revenue to $439 million. Daily shipments were up 15% with revenue per shipment 12% higher. ArcBest’s managed transportation offering saw record daily volumes in the period.

The segment recorded adjusted operating income of $6.3 million, which exceeded recently raised guidance of $3 million to $5 million. Purchased transportation expense was up 210 bps y/y (to 86.5% of revenue) as capacity tightening pushed spot rates higher. The unit recorded a 12% decline in selling, general and administrative expenses due to productivity initiatives. Shipments per person per day increased 35%.

The company is calling for $6 million to $8 million in adjusted operating income in the third quarter.

Restructuring supports 2028 targets, not incremental

ArcBest announced a brand restructuring and said it was reducing its workforce by approximately 2% earlier this month. The actions also include the closure of 10 LTL terminals (1% of dock doors).

The initiative is expected to achieve a $40-million-cost-savings run rate by the first quarter. However, the savings support 2028 financial targets and are not incremental. Approximately 75% of the cost actions are in the asset-based unit, with the bulk of the remainder occurring in the asset-light business. (Roughly $2 million is tied to the portion of its Vaux business that has been shuttered.)

It also launched ArcBest View, a digital logistics platform managing workflows while providing visibility across modes. The changes have it on track to meet 2028 targets outlined during its investor day last September.

Shares slide 8%

The company reported a second-quarter headline net loss of $13.8 million, or 62 cents per share, on Wednesday before the market opened. However, adjusted earnings per share were $2.38, excluding restructuring, impairment, technology and other nonrecurring costs. The result was 12 cents ahead of consensus and $1.02 higher year over year.

Consolidated revenue was up 16% y/y to $1.18 billion, slightly outpacing the $1.17 billion consensus estimate.

Shares of ARCB were down 7.6% at 10:54 a.m. EDT on Wednesday compared to the S&P 500, which was down 0.8%.

Why it matters? ArcBest is one of a few publicly traded LTL companies. Its quarterly results provide insight into a subsegment of trucking where few public datasets exist.

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