Trucking company ArcBest(NASDAQ: ARCB) managed to navigate past speedbumps, including demand questions and market disruptions, and still deliver earnings that were above expectations. Investors were excited, sending shares of ArcBest up as much as 12.4% for the day and up 8.5% as of 12:30 Eastern Tuesday.
A focus on costs drives an earnings beat
ArcBest earned $2.47 per share in its fourth quarter on revenue of $1.1 billion, surpassing Wall Street expectations for $2.21 per share in earnings on sales of $1.09 billion. Revenue was down 6.4% year over year in the quarter, but the company managed to reduce operating expenses by nearly 8%, resulting in a more than 20% jump in operating income, compared to a year ago.
The results came despite softer freight demand. Total shipments fell by 0.8% in the quarter, and total tonnage carried per day decreased by more than 7%.
"In a year marked by market disruptions and increased supply chain complexity, our people remained a critical driver of our success, helping us achieve the second best revenue performance in ArcBest's history," CEO Judy R. McReynolds said in a statement. "We look forward to accelerating growth, increasing efficiency and fostering innovation as we look ahead to even greater success in our next hundred years."
Is ArcBest a buy after a strong earnings report?
ArcBest has substantial exposure to the "less-than-truckload" (LTL) segment of the transportation business, the somewhat complex business of filling trucks with shipments from multiple customers headed to multiple destinations. The LTL business was in flux for most of 2023 due to the failure of industry giant Yellow and its subsequent piecemeal sale in bankruptcy court.
Looking ahead to 2024, the elimination of Yellow from the market should improve pricing power for ArcBest and others. But the company's fortunes are tied largely to demand, and that, in turn, depends on the health of the U.S. economy and its impact on shipping volumes.
Investors buying in today are unlikely to see massive growth but will be getting a well-managed trucker with a strong capital-allocation plan. ArcBest returned more than $100 million to shareholders in 2023 via share repurchases and dividends, and its board recently increased the company's share-repurchase program to $125 million.
ArcBest is a slow and steady company that could be well-suited for an income-focused investor's portfolio.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
