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ArcBest sees record Q4 fundamentals carry into Q1

LTL carriers still operating at the peak of the cycle

2022 off to a strong start for LTL carriers (Photo: Jim Allen/FreightWaves)

Transportation and logistics provider ArcBest reported Friday that the robust revenue growth trends in place for several quarters now have continued through February.

The company’s asset-based division, which includes LTL, reported a 24% year-over-year jump in revenue during the recent month, following a previously disclosed 22.4% increase in January. The year-over-year comparisons were similar to those booked during the 2021 fourth quarter, which was a record earnings period for the carrier.

The LTL industry is benefiting from tight capacity dynamics as e-commerce networks expand and the industrial complex continues to see growth (Manufacturing Purchasing Managers’ Index logged its 21st straight month of expansion in February). Pricing continues to move higher, a combination of contractual rate increases (roughly up 10% across the industry), heightened general rate increases and higher fuel surcharge revenue (diesel prices have spiked 38% year-over-year on average in 2022).

ArcBest’s (NASDAQ: ARCB) topline increases in the first two months of the first quarter were driven primarily by higher yields. It reported a 19% year-over-year increase in revenue per hundredweight, or yield, in February (up 19.9% in January). Tonnage was 4% higher in the month (up 2.1% in January).

Table: Company reports

The company has been accepting fewer transactional shipments in efforts to make sure it has the incremental capacity needed to service its core customers. Shipments were down roughly 1% year-over-year in both months but heavier shipment weights led to the tonnage increases.

However, among its core LTL customers, tonnage and shipments increased by a high-single-digit percentage in January and by high-single to low-double-digit percentages in February. The monthly sequential changes to start 2022 were “some of the best in the last 10 years,” a filing stated.

The selective approach to providing capacity has allowed ArcBest to raise yields significantly as revenue per hundredweight was up nearly 30% on a two-year stacked comparison in February.

Asset-light provider Forward Air (NASDAQ: FWRD) has also been taking a more discerning approach to disseminating its resources.

The company announced Friday that revenue per shipment was up 52.5% year-over-year through the first two months of the quarter in its expedited segment, which includes LTL, TL and final mile. Tonnage was up 10.7% and yield increased 16.1%. The company has been purging lower-margined freight from its network in favor of heavier loads tied to the medical and industrial technology verticals. Shipment weights were up 28.7% in the period.

ArcBest said the February growth rates were not aided by network outages caused by multiple severe winter storms last year. “For the second year in a row, the effects of winter storms had an unusually high impact on our asset-based network relative to what is normally expected in the first quarter.”

By comparison, competitors Old Dominion Freight Line (NASDAQ: ODFL) and Saia (NASDAQ: SAIA) reported large year-over-year spikes in volumes during February, in part due to the weak February 2021 comp.

Revenue in ArcBest’s asset-light segment, which excludes results from maintenance and repair unit FleetNet, increased 142% year-over-year in February following a 135.5% jump in January. The results include the November acquisition of TL broker MoLo. The division is seeing higher purchased transportation expenses as well. As a percentage of revenue, purchased transportation costs were 86.1% in January and 85% in February.

ArcBest raised its long-term financial targets in conjunction with its fourth-quarter report.

The new guidance calls for consolidated revenue to potentially double by 2025 to a range of $7 billion to $8 billion. Operating margins in its asset-based segment are expected to increase to a range of 10% to 15% (higher than the prior guide of high single digits) and asset-light operating margins are expected to be in the 4% to 6% range.

Chart: (SONAR: LCWTF.USA) – Final reporting of LTL rates. Seven-day moving average of daily median rate per 100 pounds. Reported on a 42-day lag. To learn more about FreightWaves SONAR, click here.

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Watch: February employment report

Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.