Less-than-truckload (LTL) carrier ArcBest Corp. (NASDAQ:ARCB) reported weaker-than-expected first quarter results after financial markets closed on May 2, with a decent operating performance in its core asset-based segment weighed down by weakness in its smaller and, until recently, faster-growing asset-light operation which relies on outside carriers.
In all, revenue rose to $711.8 million in the first quarter of 2019, a small gain over the $700 million in revenue during the first quarter of 2018. Net income was $4.9 million, or $0.18 per diluted share, compared with $10 million, or $0.37 per diluted share in the first quarter of 2018. Analysts were forecasting earnings per share of around $0.30.
Operating income fell to $8.6 million from $12.7 million, the Fort Smith, Arkansas-based company said. Operating income for the company’s asset-based business, which consist of the familiar ArcBest trucks manned by Teamster drivers, rose slightly to $13.6 million. Yet operating income for its asset-light segment, which encompasses expedited services, brokerage, managed transportation and the company’s FleetNet maintenance and repair operation, fell sharply to $3.2 million from $4.7 million. Most of the income decline in the segment was felt in those operations not related to FleetNet.
ArcBest attributed about $1 million of the operating income shortfall to the costs of building out owner-operator and contract carrier capacity. Yet the unit, which was coming off a record first quarter in 2018, also reported fewer shipments and lower revenue per shipment. The expedited delivery business, in particular, was impacted by weaker demand and lower pricing as a “more balanced truckload capacity environment” reduced the need for expedited services, the company said.
On the asset-based side of the ledger, revenue that was reported on a per-day basis rose 5.8 percent during the first quarter of 2019. Daily shipment volume rose 3.1 percent, while tonnage and weight per shipment both declined during the quarter. Yield, measured by revenue for each 100 pounds carried, rose 8 percent as the company capitalized on the multi-year continuation of firm LTL pricing. The unit’s operating ratio, a ratio of revenue to expenses, rose to 97.3 percent from 97.2 percent. This meant that for every $1 in revenue, the unit spent 97.3 cents.
Judy R. McReynolds, the company’s chairman, president and CEO, said business conditions moderated in the first quarter of 2019 compared with the year-earlier period, while inclement weather was also a factor in the results.