ArcBest Underperform Rating: Deterioration in Margins and Market Position

Analyst Ken Hoexter of Bank of America Securities reiterated a Sell rating on ArcBest (ARCB – Research Report), reducing the price target to $110.00.

Ken Hoexter has given his Sell rating due to a combination of factors impacting ArcBest’s financial performance and market position. The first quarter of the year showed a marked deterioration in margins, which fell short of both Bank of America Securities’ expectations and the consensus on the Street. ArcBest’s adjusted earnings per share (EPS) declined 15% year-over-year, missing the target set by analysts. Moreover, the company’s Asset-Based (LTL) adjusted Operating Ratio only showed a slight improvement from the previous year, yet it was more negative than anticipated, indicating less efficient operations than competitors.

Additionally, ArcBest’s tonnage and revenue experienced a significant drop in April, with a year-over-year decline that outpaced the reductions seen in the previous quarter. This downturn was attributed to a strategic shift away from transactional business and broader industry pressures, leading to an acceleration of revenue and tonnage declines. Hoexter’s reassessment also takes into account the company’s slow capacity growth targets, its shrinking market share, and the constraints posed by a unionized labor force. These elements are seen as limitations to ArcBest’s ability to navigate demand cycles effectively, prompting a reduction in the price objective and reinforcing the Underperform rating.

Based on the recent corporate insider activity of 58 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of ARCB in relation to earlier this year.

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ArcBest (ARCB) Company Description:

ArcBest Corp. is a holding company which engages in the provision of freight transportation services and solutions. It operates through the following business segments: Asset-Based, ArcBest, and FleetNet. The Asset-Based segment includes national, inter-regional, and regional transportation of general commodities through standard, expedited, and guaranteed less-than-truckload services. The ArcBest segment refers to the operations of the company’s expedite, truckload, and truckload-dedicated businesses as well as its premium logistics services; international freight transportation with air, ocean, and ground service offerings. The FleetNet segment covers the operations of FleetNet America, Inc., and certain other subsidiaries that provide roadside assistance and maintenance management services for commercial vehicles through a network of third-party service providers. The company was founded in 1966 and is headquartered in Fort Smith, AR.