First quarter financials expected to be good for ArcBest, USA Truck

by Michael Tilley ([email protected]) 1,353 views 

Analysts with Stephens Inc. believe other equity market watchers are underestimating the first-quarter financial numbers Fort Smith-based ArcBest and Van Buren-based USA Truck will report later this week. They also see continued “mystery” in global inventory levels.

USA Truck, a long-haul shipping and logistics company, will report earnings Thursday (April 28) after the markets close. ArcBest, a logistics company and the parent company of ABF Freight, one of the nation’s largest less-than-truckload carriers, will report earnings Friday before the markets open.

The earnings per share consensus estimate for USA Truck is 76 cents, with revenue estimated at $185.55 million. Stephens analyst Jack Atkins and associate Cameron Hoglund have an estimate of 91 cents per share. The analysts predict a “strong quarter” for the company.

“It is our sense that USAK will have a strong quarter, driven by performance in its Brokerage segment, improved asset utilization and contractual rate improvements,” the analysts noted in an April 22 note to investors.

Atkins and Hoglund also believe USA Truck has been able to acquire new equipment despite shortages for some types of tractors and trailers amid supply chain issues.

A strong first quarter would follow a record year. USA Truck posted 2021 net income of $24.768 million, more than five times 2020 net income and a record for the trucking and logistics company. Full-year revenue was $710.387 million, up 28.9% compared with 2020 revenue of $551.138 million.

Company shares (NASDAQ: USAK) closed Tuesday at $15.31, down 54 cents. During the past 52 weeks, the share price has ranged between $29.09 and $13.01.

The earnings per share consensus estimate for ArcBest is $2.15, with Atkins and Hoglund pitching an estimate of $2.30 per share. The consensus estimate also has ArcBest reporting $1.26 billion in quarterly revenue. In their note, Atkins and Hoglund believe ArcBest’s recent $235 million acquisition of Chicago-based MoLo Solutions could help the bottom line sooner than expected. MoLo is a truckload freight brokerage firm with access to more than 70,000 “carrier partners” in the truckload shipping business. MoLo posted 2020 revenue of $274 million, and is on track for $600 million in revenue in 2021.

“(W)e continue to believe the market is severely undervaluing the Company’s network and not giving ARCB the credit it deserves for improvements in profitability over the last few freight cycles,” the analysts said about ArcBest.

ArcBest’s 2021 net income was $213.521 million, well above the $71.1 million in 2020. Full-year revenue totaled $3.98 billion, up 35.4% compared with $2.94 billion in 2020.

Company shares (NASDAQ: ARCB) closed Tuesday at $71.84, down $3.45. During the past 52 weeks the share price has ranged between $125 and $52.86.

Atkins and Hoglund also provided comment on what they say is a “complicated” global inventory and supply chain. A big part of the problem is the continued COVID-19 shutdowns of large Chinese cities. According to the two analysts, about 40% of Chinese economic output has been curtailed by the shutdowns.

“While cargo in Shanghai is still moving, capacity is estimated to be down ~20% due to the restrictions causing labor shortages in many warehouses, manufacturing plants, and truck transportation out of the ports,” the analysts noted, adding that “the inventory situation remains fluid and the situation in China will likely extend the restocking cycle longer than what we would have expected even a few weeks ago.”

They also provided the following three points on inflation.
• An increase in parts/good shortages will only add to the inflationary pressures in the broader economy, which ultimately isn’t good for demand.
• The economy is in a different place now compared to two years ago in that the federal government isn’t injecting multiple rounds of stimulus into the economy, but is taking stimulus out of the economy via the actions of the Federal Reserve.
• The shift from consumer spending on goods to services in 2022 is only beginning and could be an increasing headwind for freight activity for the remainder of this year and into 2023.