Dynamic pricing, easy comps end 22-month tonnage downturn at ArcBest
Easy comps and dynamic pricing have ArcBest back in growth mode, but yields are now lagging. The post Dynamic pricing, easy comps end 22-month tonnage downturn at ArcBest appeared first on FreightWaves.
ArcBest has seen metrics flip through the first two months of the second quarter with tonnage returning to growth as yields lag. Easy volume comps after nearly two years of declines and heavier usage of a dynamic pricing tool were the catalysts.
The company’s asset-based segment, which includes results from less-than-truckload subsidiary ABF Freight, reported a 2% year-over-year increase in revenue per day during May, which followed a flat result in April, according to a filing with the Securities and Exchange Commission.
Tonnage was up 6% y/y during May – the biggest y/y increase for the carrier since August 2022. The increase was driven by a 7% increase in shipments, which was slightly offset by a 1% decline in weight per shipment. Tonnage in the segment increased 3.6% y/y in April, which was the first positive move since May 2023.
The volume increases were due to the easy comps created by a 22-month stretch of declines. ArcBest (NASDAQ: ARCB) has used a dynamic pricing model, which provides discounts to fill available network capacity (and vice versa) during the soft stretch.
Overall, ArcBest noted more shipments from core accounts but said demand from manufacturing-tethered and household-moving customers remained soft.
Manufacturing activity, which generates nearly two-thirds of the LTL industry’s freight, slumped in May. The Manufacturing Purchasing Managers’ Index remained slightly in contraction territory at 48.5 (a 50 reading is neutral). The new orders subindex, which is indicative of future near-term freight demand, remained in decline at 47.6.
On a two-year-stacked comparison, ArcBest’s tonnage was off 16% in May following a 17.9% decline in April. The stacked comps bottomed in January (down 27.2%).
Revenue per hundredweight, or yield, was down 3.4% y/y in April and 4% lower in May even with modest declines in weight per shipment (the denominator in the equation). Through the first two months of the second quarter, yield is down 2% excluding the impact of fuel surcharges. Fewer shipments with manufacturing customers and the mix shift to core accounts were cited as the reasons.
“This decline was influenced by an increase in shipments from core customers with easier-to-handle freight, which generally have a lower revenue per hundredweight profile but are operationally more efficient,” the company said in the filing.
ArcBest was also up against tough yield comps from a year ago – plus-24.6% and plus-26% from April and May of 2024, respectively.
While there is some noise in ArcBest’s yields, it said on the first-quarter call in April that contractual rate increases averaged 4.9% y/y, a 10.2% increase on a two-year-stacked comp. The filing said that “the pricing environment remains rational.
The company reiterated its prior margin guidance. It normally sees 300 to 400 bps of improvement from the first to the second quarter and expects to perform within that range again this year.
That implies a 92.4% adjusted operating ratio at the midpoint, which would be 260 basis points worse y/y.
ArcBest upped its forecast for the asset-light unit, which includes truck brokerage.
The segment is now expected to see breakeven results to $1 million in adjusted operating income during the second quarter. That’s better than the prior guide calling for an operating loss of $1 million to $2 million and would break a streak of seven straight quarterly losses.
Revenue is down 11% y/y in the unit through the first two months of the second quarter as shipments per day are down 5% and revenue per shipment is off 6%. Purchased transportation expense as a percentage of revenue has held steady at 85%.
Conversely, LTL carrier Saia (NASDAQ: SAIA) reported last week that its 22-month streak of y/y tonnage increases come to an end in May. The carrier was among the most aggressive in taking market share following Yellow Corp.’s July 2023 shutdown.
Shares of ARCB were up 5.2% at 10:32 a.m. EDT on Monday compared to the S&P 500, which was up 0.1%.
More FreightWaves articles by Todd Maiden:
- Saia’s tonnage turns negative after 22-month run
- XPO sees modest tonnage decline in May
- Old Dominion’s May update in line with prior Q2 guide
The post Dynamic pricing, easy comps end 22-month tonnage downturn at ArcBest appeared first on FreightWaves.
