ArcBest's $10.M 2Q profit half of '15's

Graphs showing ArcBest Corp. second quarter information.
Graphs showing ArcBest Corp. second quarter information.

ArcBest Corp. reported a second-quarter profit of $10.2 million, or 39 cents per share, on Friday, down 49 percent from a $20 million profit in the same quarter of last year.

Revenue for the Fort Smith-based company fell 2.8 percent to $676.6 million for the quarter compared with last year, and ArcBest lowered its forecast for total 2016 n̶e̶t̶ ̶i̶n̶c̶o̶m̶e̶ capital expenditure costs* by $10 million, to between $170 million and $190 million.

"Lower business levels and the impact of lower fuel surcharges affected second-quarter revenue at most of our businesses," Chief Financial Officer David Cobb said during a conference call, echoing the challenges facing many of ArcBest's competitors.

Analysts polled by Thomson Reuters had predicted a profit of 43 cents per share for the quarter ending June 30.

"Obviously they had an earnings-per-share miss, but revenues were right on target. And, the stocks are up because the Street recognizes the difficulty of operating in this economy," said Bob Williams, senior vice president and managing director of Simmons First in Little Rock.

ArcBest shares rose 77 cents, or 4.3 percent, to close Friday at $18.71 on the Nasdaq exchange.

ABF Freight, the company's less-than-truckload division and largest subsidiary, reported revenue decreasing by 3.5 percent to $486.7 million.

"Softness in the industrial and manufacturing sectors continued to impact ABF Freight's business during the second quarter, much as it has throughout 2016, contributing to lower total revenue and tonnage compared to last year," ArcBest Chief Executive Officer Judy McReynolds said during a conference call to discuss the report.

Also noted was a 4 percent decrease in tonnage per day in relation to a .4 percent decrease of shipments per day, resulting in a drop in efficiency of each shipment. Total weight per shipment decreased 3.6 percent.

Cobb pointed out that total corporate health-care costs had risen $1.7 million because of "increases in the number of health claims filed and a higher average expense of those claims."

Taken together, ArcBest's asset-light divisions -- Panther, ABF Logistics, FleetNet and ABF Moving -- showed slightly increased revenue, which remained around $205 million. This sector now makes up 30 percent of ArcBest's total business, up from 29 percent last year.

The company had previously set a goal of eventually growing that to 50 percent to diversify its portfolio. Asset-light implies using owner-operators and other partnerships to keep overhead costs of equipment and real estate down.

McReynolds highlighted that ArcBest has made progress in its "cross-selling goals" of ABF Freight customers using their asset-light subsidiaries. Over the last 12 months, a reported 24 percent of ABF Freight customers are doing this, up from 6 percent in 2011.

ArcBest b̶l̶a̶m̶e̶d̶ credited* ABF Logistics' 35 percent revenue d̶e̶c̶r̶e̶a̶s̶e̶ increase on a recent acquisition of Bear Transportation. The company has had to work to integrate the new locations, implement structural changes and convert them to new software, among other things.

McReynolds explained that "employee productivity and proficiency suffered." However, Cobb projected that the assets of its Bear firm would start positively affecting revenue by the end of 2016.

ABF Logistics acquired Bear, a Texas-based brokerage firm, for $26 million in December of 2015.

A decrease in government shipments dramatically affected ABF Moving, which posted a 20 percent revenue drop, to $25.7 million. Cobb pointed out that 2015 was a "record year" for government shipments and has been down 30 percent in 2016.

McReynolds sought to assuage worry about the quarter's downward numbers, pointing to their "healthy dividend" of 8̶0̶ 8* cents per share and other very recent upward trends.

"I think we're doing fine. July is consistent with where we were in June, but we aren't seeing anything of great concern, just a little bit of a weakening from where we were in other quarters," she said.

Business on 07/30/2016

*CORRECTION: ArcBest Corp. lowered its projected 2016 capital expenditure costs by about $10 million, not its net income forecast as reported this article. ArcBest also paid a quarterly dividend of .08 per share and reported a 35 percent increase in revenue in its ABF Logistics division. Both numbers were incorrect in the article.

Upcoming Events