ArcBest posts second quarter income of $24 million, misses income and revenue estimates

Fewer and lighter shipments resulting from a “moderated” economy put a cap on ArcBest’s financials in the second quarter, but the Fort Smith-based transportation holding company still managed to post net income of more than $24 million.

The company reported Wednesday (July 31) that second quarter net income was $24.376 million, well ahead of the $1.233 million in the same quarter of 2018. Per share earnings of 92 cents missed the consensus estimate of stock watchers of 94 cents.

Second quarter revenue totaled $771.49 million, down 2.8% from the $793.35 million in the same quarter of 2018. The revenue also missed the consensus estimate of $779.86 million.

“Once again we saw that business conditions, while still relatively healthy, moderated in the second quarter from last year’s record-setting levels but on an overall historical basis the quarter was solid with a rational underlying pricing environment,” ArcBest Chairman, President and CEO Judy McReynolds said in the earnings report. “Revenue improved month to month for our asset-based business while our asset-light business continued to see softer expedited services conditions on increased available truckload capacity.”

Revenue during the first six months of 2019 totaled $1.483 billion, down 0.67% from the $1.493 billion in the same period of 2018. Net income for the first six months is $29.264 million, better than the $11.187 million in the first six months of 2018. However, the 2018 cycle includes a $37.9 million one-time charge related to a multiemployer pension program.

ABF, ASSET-LIGHT NUMBERS
Second quarter revenue with ABF, the company’s asset-based subsidiary and one of the nation’s largest less-than-truckload carriers, was $559.648 million, just slightly above the $559.239 million in the 2018 quarter. Operating income at ABF during the quarter reached $36.178 million, better than the $3.381 million in the same quarter of 2018. Without the one-time pension related charge, the 2018 quarterly operating income was $41.3 million.

Tonnage per day at ABF fell 3.4%, but billed revenue per hundredweight was up 4.1% during the quarter.

“Continued improvement in yield management and customer pricing initiatives, despite fewer shipments and lower freight tonnage, resulted in a slight increase in second quarter, daily revenue versus last year,” the company noted in the earnings report.

Second quarter revenue in the company’s asset-light businesses, ArcBest Logistics and FleetNet, was $232.895 million, below the $246.779 million in the 2018 quarter. The asset-light operating income during the quarter was $3.148 million, down 33.5% from the $4.736 million in the same quarter of 2018. The company said fewer shipments and less revenue per shipment were reasons for declines in revenue and operating income.

ECONOMIC ISSUES
“Our outlook for the second half sees a continuation of the current trends and we will monitor for any changes to that view, particularly as it relates to federal tariff policies and developments in the manufacturing and industrial sectors of the economy,” McReynolds noted.

Industrial sector declines were also noted in a July 26 investor note from Stephens Inc. analysts Jack Atkins and Scott Schoenhaus. The note, an earnings report follow up on Old Dominion Freight Line (ODFL), a less-than-truckload carrier and ABF competitor, noted that more capacity (equipment) and “decelerating industrial trends” have resulted in tonnage declines.

“With pricing commentary from ODFL and others indicating stable trends in the LTL market, our biggest concern remains the potential for a further deceleration of industry tonnage due to a deteriorating outlook for the industrial economy,” the analysts noted in their report.

Despite missing income and revenue estimates for the quarter, the market was somewhat bullish on ArcBest following the earnings report. ArcBest shares (NASDAQ: ARCB) were around $30.80 in early afternoon trading, up more than 7%. The shares closed Tuesday at $28.78. During the past 52 weeks the share price has ranged between $51.45 and $24.69.