ArcBest’s Q2 beat underscores successful yield initiatives

Transportation and logistics provider ArcBest reported record results for the second quarter Friday before the market opened. The company’s asset-based segment, which includes less-than-truckload, used a better freight mix and higher yields to post an 84.5% adjusted operating ratio.

ArcBest (NASDAQ: ARCB) reported adjusted earnings per share of $4.30 for the second quarter, 35 cents better than the consensus estimate and $2.27 higher than the year-ago quarter. The result excluded a few items, including expenses associated with a freight handling pilot as well as acquisition-related expenses.

Consolidated revenue was 47% higher year over year (y/y) at $1.39 billion. Each business unit saw revenue increase by at least double-digit percentages. The large jump on the top line included the benefit of the MoLo brokerage acquisition, which closed in November.

Preliminary results for July show ArcBest’s consolidated revenue is 36% higher y/y, with all of its divisions seeing increases.

Revenue in the asset-based unit increased 23% y/y to $803 million in the quarter. Tonnage was 3.7% higher, and revenue per hundredweight, or yield, increased 17.7%. The yield metric benefited from higher fuel surcharges. Excluding fuel, LTL yield was up by a “percentage in the double digits,” a separate filing showed. Contract renewals in the division increased 8% y/y in the quarter, compared to a 9% y/y growth rate in the 2022 first quarter.

The improved yield metrics led to 450 basis points in OR improvement (84.5% adjusted OR). The salaries, wages and benefits line as a percentage of revenue in the asset-based segment was the biggest mover, down 540 bps y/y.

So far in July, asset-based revenue per day is 18% higher y/y. Tonnage is up 6% and yield inclusive of fuel surcharges is 11% higher.

Asset-light revenue, which includes brokerage, increased 91% y/y to $632 million. The division saw 220 bps of y/y margin improvement, posting a 94.5% OR. Daily revenue is 76% higher y/y in July.

ArcBest reeled in its 2022 capex budget. The company now plans to incur net capital expenditures between $240 million and $250 million, $35 million lower at the midpoint of the range. The spending will include $115 million in equipment purchases and $45 million to $50 million in real estate outlays.

ArcBest will host a call with analysts at 9:30 a.m. Friday to discuss results.

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Editor: Todd Maiden