ArcBest share price up 28% in Friday trading, sets new 52-week high

Friday (May 11) was Good Friday for shareholders of Fort Smith-based ArcBest after the company’s share price – fueled by a much better than expected first quarter report published Thursday afternoon – rose 28% to set a new 52-week high.

Investors may also have rewarded the company for a Thursday union vote in which 58.42% of the company’s unionized employees voted for a new five-year master contract.

ArcBest, whose largest subsidiary is less-than-truckload carrier ABF Freight, on Thursday posted net income of $9.954 million, a wide swing from the first quarter 2017 loss of $7.407 million. The adjusted earnings per share of 29 cents beat the consensus estimate of a 7-cent per share loss. First quarter revenue reached $700.001 million, up 7.5% compared with the $651.088 million in the first quarter of 2017. Revenue also beat the consensus estimate of $691.18 million.

ArcBest shares (NASDAQ: ARCB) closed Friday at $47.30, up $10.35, or 28%. Intraday trading saw the share price hit $48.70, blowing past the previous 52-week high of $39.70. Friday’s closing price is also more than 2.7 times higher than the 52-week low of $16.95. Friday’s trading volume was more than 2.34 million, almost nine times the average daily volume.

Blackrock Inc., the largest institutional ArcBest shareholder, earned on paper $34.373 million as a result of Friday’s trading. ArcBest Board Chairman, President and CEO Judy McReynolds’ holdings on Friday gained more than $1.56 million in value.

Little Rock-based Stephens Inc. on Friday raised its target share price from $31 to $36, and raised its full year earnings per share estimate from $2.30 to $2.75. In their investor note, Stephens analyst Brad Delco and associate Scott Schoenhaus said ArcBest “demonstrated strong margin performance,” adding that ABF Freight contract renewals were up 4.8% in the quarter, the second highest first quarter renewal rate in 19 years.

Rich Smith, a writer with Motley Fool, said Friday’s gain was likely the result of the market previously being too cautious about the company’s future.

“For what it’s worth, analysts on Wall Street think ArcBest will end up earning $2.32 per share this year on sales of just under $3 billion. But given the strong market for trucking, and the fact that ArcBest has earned far more than that over the last 12 months, I suspect the analysts may turn out to be too conservative on this. Investors today seem to think so, too,” Smith wrote.

Delco and Schoenhaus remain unsure about what the new labor contract may mean for ArcBest. An April 13 investor note from Little Rock-based Stephens Inc. said the agreement favors the Teamsters “more than what we previously expected,” and “and will likely keep ABF Freight in a market share losing position for the life of this contract.”

“While we believe these results are strong, our concern still rests on the fact that (ArcBest’s) cost structure is till too high vs. peers, and if the current labor contract is fully ratified … it will lock them in to this arrangement for five more years,” the analysts wrote in their Friday note, adding that the company “didn’t get any breaks on health or welfare benefits, but did secure 1%-2% annual wage increases locked in over 5 years.”

UNION VOTE NUMBERS, REACTION
There were 9,441 eligible voters, and 6,357 votes were cast, meaning 67.3% of eligible voters voted Thursday. There were 27 so-called supplemental ballots – votes cast by smaller regional groups often with a specific occupation – in addition to the master agreement vote. Of those, nine were not approved.

Ernie Soehl, director of the Teamsters National Freight Division and co-chairman of the Teamsters National Freight Industry Negotiating Committee, said Teamster officials will work on addressing the nine failed supplemental votes.

“We realize that some of our ABF members have concerns that are unique depending on their areas,” Soehl said in a statement. “We will work with the Supplemental Committees in those areas to discuss those issues. We will then work to address supplemental issues with the employer and, if appropriate, seek to obtain revisions to the supplements for re-balloting so that the national master contract and all the supplements can take effect.”

ArcBest issued this statement: “ABF is pleased to announce that our employees represented by the International Brotherhood of Teamsters have ratified the ABF National Master Freight Agreement and a majority of the supplements. This agreement for a 63-month term starting April 1, 2018 is affordable for the company and fair to employees. It will take effect once all supplements are ratified. We will reconvene with the Teamsters in the near future to address the issues in the supplements that were not ratified. Additional detail will be provided as it becomes available. We thank everyone for their ongoing commitment to serving our customers during this process.”