• ITVI.USA
    15,427.340
    -96.020
    -0.6%
  • OTLT.USA
    2.866
    -0.013
    -0.5%
  • OTRI.USA
    20.920
    0.030
    0.1%
  • OTVI.USA
    15,398.650
    -86.650
    -0.6%
  • TSTOPVRPM.ATLPHL
    2.820
    -0.100
    -3.4%
  • TSTOPVRPM.CHIATL
    3.580
    -0.100
    -2.7%
  • TSTOPVRPM.DALLAX
    1.260
    -0.030
    -2.3%
  • TSTOPVRPM.LAXDAL
    3.650
    0.030
    0.8%
  • TSTOPVRPM.PHLCHI
    2.330
    -0.090
    -3.7%
  • TSTOPVRPM.LAXSEA
    4.020
    -0.150
    -3.6%
  • WAIT.USA
    127.000
    -1.000
    -0.8%
  • ITVI.USA
    15,427.340
    -96.020
    -0.6%
  • OTLT.USA
    2.866
    -0.013
    -0.5%
  • OTRI.USA
    20.920
    0.030
    0.1%
  • OTVI.USA
    15,398.650
    -86.650
    -0.6%
  • TSTOPVRPM.ATLPHL
    2.820
    -0.100
    -3.4%
  • TSTOPVRPM.CHIATL
    3.580
    -0.100
    -2.7%
  • TSTOPVRPM.DALLAX
    1.260
    -0.030
    -2.3%
  • TSTOPVRPM.LAXDAL
    3.650
    0.030
    0.8%
  • TSTOPVRPM.PHLCHI
    2.330
    -0.090
    -3.7%
  • TSTOPVRPM.LAXSEA
    4.020
    -0.150
    -3.6%
  • WAIT.USA
    127.000
    -1.000
    -0.8%
Company earningsLess than TruckloadLogisticsNewsTop StoriesTrucking

ArcBest’s capital spending plan signals confidence in prolonged freight cycle

Contract renewals see best increase in 20 years

Management from ArcBest Corp. (NASDAQ: ARCB) said a “robust demand” environment has them already thinking about the 2022 capital expenditures budget during a call with analysts Tuesday. The company is looking to improve its capacity profile to capture the incremental freight demand in the market.

ArcBest has also ramped the hiring of drivers, dockworkers and IT personnel recently.

The Fort Smith, Arkansas-based logistics provider reported adjusted earnings per share of $1.01, much better than the consensus estimate of 58 cents and nearly three times the year-ago period.

The 2021 net capex budget calls for $150 million to $160 million in spending; $100 million is slated for equipment replacements with the rest of the budget allocated for investments in real estate, technology and dock equipment. The company wants to reduce its reliance on linehaul purchased transportation as spot market truckload rates have surged.

ArcBest plans to increase capex by $50 million to $60 million in 2022. The company plans to add an unspecified number of new trucks to meet the higher freight volumes.

The balance sheet aligns well with the spending initiatives. The company ended the quarter with $361 million, or $13 per share, in cash and short-term investments. Total debt declined $17 million to $267 million and total liquidity was $654 million.

In addition to the planned investments, management said the large cash balance could be deployed to increase dividends and share repurchases. Management is still looking at acquisitions in the asset-light space but admitted valuation multiples have been prohibitive as most transportation companies are experiencing strong growth.

First-quarter results and expectations

ArcBest’s consolidated revenue increased 18.2% year-over-year to $829 million.

The company posted a 95.3% consolidated operating ratio, 290 basis points better than the 2020 first quarter and well ahead of historical sequential changes. The consolidated OR improved 10 bps from the fourth quarter to the first, a period that normally sees margins decline between 350 bps and 450 bps.

ArcBest’s key performance indicators

Asset-based revenue, which includes less-than-truckload, increased 7.9% year-over-year to $556 million. Tonnage was up 1.8% across the division, with LTL tonnage increasing by a mid-single-digit percentage. LTL shipments increased 3%, with weight per shipment up 2.6%. Management noted improvement in demand from both its industrial and retail customers.

Spot truckload tonnage was down by a double-digit percentage.

LTL revenue per hundredweight, excluding fuel surcharges, increased by a mid-single-digit percentage year-over-year. Rates on contract renewals and deferred pricing agreements were up 5.6%, which was the company’s best first-quarter increase in 20 years.

Management said sequential trends from March to April – revenue per day (+6%) and tonnage per day (+5%) – were the strongest in 10 years.

In April, asset-based revenue increased 47% year-over-year as tonnage grew 29% and shipments climbed 19%. The year-over-year comparisons were significantly impacted by a severe decline in demand during April of 2020 as COVID-related lockdowns spread. Revenue per hundredweight, inclusive of fuel, was up 15% during the month.

The asset-based segment recorded an adjusted OR of 93.4%, 310 bps better year-over-year. An increase in shipments led to higher usage of purchased transportation, notably in local and linehaul moves. The expense line was 280 bps higher year-over-year as a percentage of revenue.

However, higher yields, a 370-bp decline on the wages and benefits line and nearly four times the gains on sale, drove the margin improvement in the quarter. Better freight handling and operational improvements, even with network outages caused by severe winter storms, were credited for the improvement as well.

Asset-light revenue was 43.4% higher year-over-year at $312 million. Strong demand and higher rates drove the increase. The division recorded $9.3 million in operating income compared to a slight loss in the prior-year period.

Asset-light revenue per day was up 89% year-over-year in April.

Click for more FreightWaves articles by Todd Maiden.

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.

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