ArcBest’s Declining Financial Performance and Market Pressures Lead to Sell Rating

In a report released yesterday, Ken Hoexter from Bank of America Securities reiterated a Sell rating on ArcBest (ARCB – Research Report), with a price target of $58.00.

Ken Hoexter has given his Sell rating due to a combination of factors affecting ArcBest’s financial performance. The company’s first-quarter earnings per share significantly declined compared to the previous year, falling short of expectations. This was primarily due to the underperformance of its Asset-Based Freight segment, which experienced a deterioration in operating ratios beyond typical seasonal trends. Additionally, revenue per hundredweight has been decreasing, driven by a shift towards shipments with lower yield profiles and a reduction in higher-yielding manufacturing shipments.
Furthermore, ArcBest’s Asset-Light segment also faced challenges, with revenue declines surpassing targets despite some operational efficiencies. The ongoing market pressures and the company’s exposure to low-margin transactional freight contribute to the cautious outlook. Consequently, the price objective for ArcBest’s stock has been lowered, reflecting concerns over an extended freight recession and pricing pressures, which underpin the Sell rating.

ARCB’s price has also changed dramatically for the past six months – from $104.370 to $56.730, which is a -45.65% drop .