ArcBest makes its numbers but the quarter overall is weak

ArcBest (NASDAQ: ARCB) posted quarterly earnings that exceeded, on a non-GAAP basis, the Wall Street consensus of how it would perform in the fourth quarter of 2019.

The LTL carrier’s non-GAAP earnings were 56 cents per share, which topped consensus by 11 cents, according to SeekingAlpha. Revenue of $717.42 million was about $4.4 million short of consensus.

On a GAAP standard, ArcBest actually lost money in the fourth quarter. The GAAP net income per share was negative 22 cents, or $5.5 million.

The operating statistics for the company that were positive were only barely so. For example, billed revenue per hundredweight was up 1.2% to $435.6 million, up from $430.4 million in the fourth quarter of 2018. Billed revenue per shipment was up 1.2%, to $435.59 million from $430.36 million.

Beyond that, it was all negative for the carrier. Shipments were down 7.3% from the fourth quarter of 2018 to 1,173,949. Shipments per day were down by the same percentage. Total tonnage dropped 8.1% to 717,708 while tons per day was also down 8.1%, to 11,670. Pounds per shipment was down 0.8% to 1,223. Average length of haul rose slightly, to 1,032 miles.

Although the LTL business may have slid for ArcBest, it got a boost from truckload quantities slipping into the LTL segment. The drop in LTL shipments “were somewhat mitigated by an increase in TL‑rated, spot shipments moving through the ABF Freight network,” the company said in its statement.

In the prepared statement announcing the earnings, ArcBest Chairman, President and CEO Judy McReynolds described the full year as “solidly profitable.” For all of 2019, ArcBest’s non-GAAP net income was $14.84 million, down from $28.26 million for all of 2018. Earnings per share dropped to 56 cents from $1.06 the year before. On a GAAP basis, ArcBest was unprofitable in 2019, with a net loss of $11.23 million.

The asset-based segment of ArcBest, which operates as ABF Freight, posted non-GAAP operating income in the fourth quarter of $25.414 million for an operating ratio of 95%. That was an OR deterioration from the fourth quarter of 2018 of 190 basis points. For the full year, non-GAAP OR in the asset-based segment was 94.5% compared to 93.3% in 2018.

The asset-light division, which includes the ArcBest and FleetNet segments (so it includes the company’s brokerage activities), took it on the chin.

For the ArcBest segment, its operating ratio on a GAAP basis was 114.4% and a 100% OR on a non-GAAP basis. The non-GAAP figure was up 360 basis points from the fourth quarter of 2018.

“Reduced fourth quarter revenue in the Asset-Light ArcBest segment versus the prior year reflects a market-driven reduction in total average revenue per shipment, primarily in the expedite and truckload brokerage businesses,” the company said in its statement. “Though purchased transportation costs are below the prior year, the rate of decrease in these carrier capacity costs did not match that of the quarter’s decline in revenue.”

The company also said the looser market for truckload capacity this year “was a factor impacting demand for expedite services and operating margins.”

The 94.5% OR for the asset-based segment set off a payment of $5.1 million to the company’s unionized workforce. “Payment of a profit-sharing bonus to union-represented employees as provided for in the 2018 collective bargaining agreement by achieving a 95.2 percent ABF Freight operating ratio in 2019 represented a significant milestone,” McReynolds said in the statement.

ArcBest will hold its earnings call with analysts on Friday morning. The company’s format for its earnings call is unique in that it does not take live questions during the call and instead answers queries submitted by analysts in advance.