ArcBest earnings miss as weaker shipping rates pressure revenue

ArcBest reported higher second-quarter profit than a year ago, but the transportation company still came in below Wall Street’s adjusted earnings expectations. For everyday investors, the key pressure point was pricing: ArcBest said a softer rate environment reduced revenue per shipment in part of its business.

The company reported net income of $46.9 million, equal to $1.96 a share, for the quarter, according to its Friday results. That was up from $40.4 million, or $1.64 a share, in the same quarter a year earlier.

On an adjusted basis, which strips out items the company classifies as nonrecurring, ArcBest earned $1.98 a share. Analysts tracked by FactSet had expected $2.07 a share, according to MarketWatch.

Revenue moved the other way. ArcBest said second-quarter sales fell 2.3% to $1.08 billion.

What weighed on the quarter

ArcBest breaks out its business into asset-based and asset-light operations. Asset-based transportation generally refers to services that use company-controlled physical assets, while asset-light operations rely less on owned equipment and more on arranging transportation through other capacity.

ArcBest said revenue per day in its asset-based business declined 2.1%. Revenue per day in its asset-light business fell 4.2%.

The company pointed to lower revenue per shipment in asset-light operations. It also said margins were reduced by a soft rate environment and by a higher mix of managed transportation business, which ArcBest said carries lower revenue per shipment and lower margins.

In plain terms, a softer rate environment means the prices transportation companies can charge customers are under pressure. When rates are weaker, a company may move freight but collect less revenue for each shipment, which can squeeze profitability depending on costs and business mix.

ArcBest’s results show that profit can improve from a year earlier while still missing analyst estimates. Investors often watch the adjusted earnings number because it is designed to make results easier to compare across periods, though companies decide which items to exclude and those adjustments can vary.

Stock performance

ArcBest shares were not yet trading in the premarket after the report, according to MarketWatch. Through Thursday, the stock was up 1.2% for the year.

That trailed the broader market over the same period. The S&P 500 had gained 14.2% year to date through Thursday, according to MarketWatch.

The quarter gives investors a clear read on the challenge for freight-exposed companies: demand and shipment mix matter, but pricing can do a lot of the work in either direction. For ArcBest, management’s own explanation centered on lower revenue per shipment and the margin impact of a softer pricing backdrop.

This story draws on original reporting from MarketWatch.