ArcBest closes out 2017 with healthy income gains

Fourth quarter and full-year net income was up 53% and 46.3%, respectively, for Fort Smith-based ArcBest, and fourth quarter earnings per share of 42 cents beat the consensus estimate of 36 cents.

ArcBest, parent company of less-than-truckload carrier ABF Freight and a logistics division, posted fourth quarter income of $11.186 million, well ahead of the $7.309 million in the same quarter of 2016. Full year net income totaled $35.57 million, also better than the $24.304 million in 2016.

The company reported full-year revenue of $2.826 billion, up from $2.7 billion in 2016. Fourth quarter revenue was $710.721 million, better than the $688.214 million in the same quarter of 2016. The fourth quarter revenue missed the consensus estimate of $721.12 million.

Recently approved changes to the federal tax code resulted in a one-time benefit to the company of $24.5 million. The benefit comes from a reduction in deferred income tax liabilities. The income numbers above do not include the impact of that accounting charge.

“We began 2017 with an aggressive plan to implement our enhanced market approach,” ArcBest Chairman, President & CEO Judy McReynolds said in the earnings report. “Our customers have been asking for full logistics solutions from us and more manageable points of contact. By responding with a unified sales force, customer service and capacity sourcing, we more expertly answer their total supply chain needs and position the company for growth.

“In addition, we undertook a number of significant actions to improve our pricing and ensure that we are adequately compensated for the value we provide customers, particularly in our Asset-Based business. We are pleased with the results of these actions to date, which are in line with our expectations, and are confident we have the right pricing strategy going forward.”

The company also said 2018 capital expenditures could range between $155 million and $165 million, with $146 million reported in 2017 capital expenditures. A majority of the spending is on equipment for ABF Freight.

“Because ABF Freight’s union labor negotiations are in progress, the timing and actual amount of these capital investments are highly dependent on the outcome of the union labor contract,” the company noted in the earnings report.

Full-year operating income at ABF Freight was $57.021 million, a healthy 53.8% gain compared with 2016. Key metrics for ABF were mixed for the year. Billed revenue per shipment was up 4.3%, but the tonnage shipped fell 2.4%.

Full-year operating income at ArcBest’s asset-light divisions – ArcBest Logistics and FleetNet – was $23.56 million, up 33.1% compared with 2016.

Market watchers in recent months have had different views on ArcBest. Brad Delco, a trucking/transportation analyst for Little Rock-based Stephens Inc., is bullish on the company.

“We believe the upward trends in crude and retail fuel prices should bode well for the group not only from an industrial end market perspective, but also because of the favorable impact on fuel surcharge programs across the LTLs,” Delco wrote in early January.

Stifel analyst David Ross downgraded ArcBest to “sell” based on uncertainty of wage and benefit negotiations with the International Brotherhood of Teamsters.

“Moreover, ABF’s current Teamsters contract expires March 31, 2018, and we do not believe the company is in a good negotiating position with a healthy balance sheet in a strong freight market,” Ross said. “This should come more into focus as we move through (the first quarter of 2018) and closer to the expiration (potential strike) with no deal signed. We are sellers of the shares into the March 31 deadline, as we believe the company will not get further concessions and may have to grant significant increases to ‘make-up’ for wages taken away in 2013.”

ArcBest shares (NASDAQ: ARCB) closed Tuesday at $35.85, down $1.25. During the past 52 weeks the share price has ranged between $16.95 and $39.70.