U.S. ‘economic weakness’ pushes ArcBest first quarter loss to $6.1 million

ArcBest posted a first quarter net income loss of $6.103 million, more than double what market watchers expected. The company said headwinds in the quarter included a “weak” U.S. manufacturing sector, high business inventory levels and increased workers’ comp costs.

The first quarter loss of $6.103 million, a 24 cents per share loss, compares to a $1.28 million gain in the 2015 first quarter. Total revenue in the quarter was $621.455 million, better than the $613.276 million during the same quarter of 2015.

Not helping the situation was an increase of $2.9 million in workers’ compensation and casualty claims expense in the quarter compared to the first quarter of 2015.

The consensus estimate among the analysts who follow the Fort Smith-based shipping and logistics holding company was an 11 cents per share loss on projected revenue of $625.98 million. The company’s largest subsidiary is ABF Freight, one of the largest less-than-truckload carriers in the U.S.

“Ongoing economic weakness continued to impact our business, consistent with trends that began in the fall of 2015,” Judy McReynolds, ArcBest chairman, president and CEO, said in the earnings report released early Friday (April 29).

The company also said revenue was lower because of fuel surcharge comparisons to the first quarter of 2015 when diesel fuel prices were higher.

“In addition to the fuel impact, ABF Freight’s first quarter revenue decline was due to reduced freight tonnage levels associated with weak U.S. manufacturing; high customer inventory levels and excess industry capacity available to move larger-sized shipments,” the company noted in the statement.

Commentary in the ArcBest earnings report mirrors that of the March tonnage index report from the American Trucking Associations. The March index was down 4.5%, the largest monthly decline since September 2012.

“The freight economy continues to be mixed, with housing and consumer spending generally giving support to tonnage, while new fracking activity and factory output being drags. In addition, freight volumes are softer than the overall economy because of the current inventory overhang throughout the supply chain,” ATA Chief Economist Bob Costello noted in his April 19 tonnage report.

A bright spot in the report is the growth of the company’s “asset-light” businesses relative to its core LTL operation. Total revenue from the asset-light companies – Panther Logistics, ABF Logistics, FleetNet, and ABF Moving – totaled $194.733 million, up 6% compared to the first quarter of 2015.

Also, the asset-light revenue was 31% of total revenue, up from 29% in the first quarter of 2015. McReynolds has said her goal is to grow the non-trucking businesses in order to diversify the revenue stream and protect the company from trouble in any one sector.

Operating Income – Q1 2016
ABF Freight
Q1 2016: –$8.332 million
Q1 2015: $883,000

Panther (Premium Logistics)
Q1 2016: $256,000
Q1 2015: $1.195 million

Fleetnet
Q1 2016: $984,000
Q1 2015: $1.17 million

ABF Logistics
Q1 2016: $666,000
Q1 2015: $775,000

ABF Moving
Q1 2016: –$749,000
Q1 2015: – $363,000

The difficult first quarter follows a 2015 that saw declines in the second half of the year. For the full year 2015, net income was $44.854 million, just under the $46.177 million in 2014. Per share earnings for the year were $1.67, below the consensus estimate of $1.96. Full year revenue totaled $2.666 billion, ahead of the $2.612 billion in 2014.

Company shares (NASDAQ: ARCB) closed Thursday at $20.83, down 6.5%. During the past 52 weeks the share price has ranged from a $38.09 high to a $16.43 low.