ArcBest Corporation (ARCB) Bundle
Understanding ArcBest Corporation (ARCB) Revenue Streams
Understanding ArcBest Corporation’s Revenue Streams
The revenue streams of the company are primarily divided into two segments: Asset-Based and Asset-Light services.
Breakdown of Primary Revenue Sources
- Asset-Based Revenues: For the three months ended September 30, 2024, Asset-Based revenues totaled $709.7 million, compared to $741.2 million for the same period in 2023.
- Asset-Light Revenues: For the three months ended September 30, 2024, Asset-Light revenues amounted to $385.3 million, down from $419.3 million in 2023.
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, consolidated revenues decreased by 5.8% compared to the same period in 2023. Year-to-date revenues for the nine months ended September 30, 2024, decreased by 4.8% year-over-year.
Contribution of Different Business Segments to Overall Revenue
| Segment | Revenue (3 Months Ended Sept 30, 2024) | Revenue (3 Months Ended Sept 30, 2023) | Percentage of Total Revenue (2024) |
|---|---|---|---|
| Asset-Based | $709.7 million | $741.2 million | 66.7% |
| Asset-Light | $385.3 million | $419.3 million | 36.2% |
Analysis of Significant Changes in Revenue Streams
The decrease in Asset-Based revenues is attributed to a 11.3% decrease in tonnage per day, partially offset by a 7.4% increase in billed revenue per hundredweight, including fuel surcharges. The Asset-Light segment experienced a revenue decline of 8.1% for the three months ended September 30, 2024, primarily due to lower average revenue per shipment amid soft market conditions.
In summary, the overall revenue decline was influenced by market pressures and changes in shipment dynamics, reflecting a challenging operational environment.
Revenue Overview
| Period | Total Revenue | Asset-Based Revenue | Asset-Light Revenue | Year-over-Year Change |
|---|---|---|---|---|
| Q3 2024 | $1,063.1 million | $709.7 million | $385.3 million | -5.8% |
| Q3 2023 | $1,128.4 million | $741.2 million | $419.3 million | N/A |
| 9M 2024 | $3,177.4 million | $2,093.9 million | $1,177.5 million | -4.8% |
| 9M 2023 | $3,337.9 million | $2,161.0 million | $1,267.2 million | N/A |
A Deep Dive into ArcBest Corporation (ARCB) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was 12.8%, compared to 10.1% for the same period in 2023. This reflects a year-over-year improvement in operational efficiency and cost management.
Operating Profit Margin: The operating profit margin for the three months ended September 30, 2024, was 12.7%, up from 4.0% in the same quarter of 2023. For the nine months ended September 30, 2024, the operating profit margin stood at 6.5%, compared to 3.2% in 2023.
Net Profit Margin: The net profit margin for the three months ended September 30, 2024, was 9.4%, significantly higher than 3.1% for the same period in 2023. The net profit margin for the nine months ended September 30, 2024, was 4.6%, compared to 4.4% in 2023.
Trends in Profitability Over Time
The overall trend in profitability metrics indicates a positive trajectory. The net income for the three months ended September 30, 2024, was $100,314 thousand, compared to $34,917 thousand for the same period in 2023. For the nine months ended September 30, 2024, net income was $144,926 thousand, slightly down from $146,643 thousand in 2023.
| Period | Gross Profit Margin (%) | Operating Profit Margin (%) | Net Profit Margin (%) | Net Income ($ thousands) |
|---|---|---|---|---|
| Q3 2024 | 12.8 | 12.7 | 9.4 | 100,314 |
| Q3 2023 | 10.1 | 4.0 | 3.1 | 34,917 |
| 9M 2024 | 12.8 | 6.5 | 4.6 | 144,926 |
| 9M 2023 | 10.1 | 3.2 | 4.4 | 146,643 |
Comparison of Profitability Ratios with Industry Averages
In comparison to industry averages, the company's gross profit margin of 12.8% is above the industry average of 10.5%. The operating profit margin of 6.5% also surpasses the industry average of 5.0%, while the net profit margin of 4.6% is slightly below the industry average of 5.0%.
Analysis of Operational Efficiency
Operational efficiency has improved as evidenced by the decline in operating expenses as a percentage of revenue, which decreased from 95.9% in Q3 2023 to 87.3% in Q3 2024. The Asset-Based segment generated operating income of $64.0 million for the three months ended September 30, 2024, compared to $74.8 million for the same period in 2023.
Labor costs as a percentage of revenue increased to 50.5% for the three months ended September 30, 2024, from 48.2% in Q3 2023. However, cost management practices have led to a decrease in fuel, supplies, and expenses as a percentage of revenue, which fell by 1.2 percentage points during the same period.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Operating Income ($ millions) | 64.0 | 74.8 |
| Labor Costs (% of Revenue) | 50.5 | 48.2 |
| Fuel, Supplies, and Expenses (% of Revenue) | 87.3 | 95.9 |
Debt vs. Equity: How ArcBest Corporation (ARCB) Finances Its Growth
Debt vs. Equity: How ArcBest Corporation Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the company reported long-term debt of $118.3 million, a decrease from $162.0 million in December 2023. The current portion of long-term debt is $62.2 million. Additionally, operating lease liabilities amount to $192.0 million, up from $176.6 million at the end of 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio as of September 30, 2024, stands at 0.09, calculated using total liabilities of $1.107 billion and total stockholders’ equity of $1.307 billion. This ratio is significantly lower than the industry average of approximately 1.5, indicating a conservative approach to leveraging debt.
Recent Debt Issuances and Credit Ratings
The company has maintained a revolving credit facility with a maximum credit amount of $250.0 million. On September 30, 2024, it paid down $50.0 million from this facility. Additionally, the company holds an interest rate swap agreement to manage interest rate risk, which had a notional amount of $50.0 million as of the same date. Credit ratings from major agencies remain stable, reflecting sound financial management.
Balancing Debt Financing and Equity Funding
The company employs a balanced strategy between debt and equity financing. In 2024, total capital expenditures are projected at approximately $300.0 million, with funding sourced from both retained earnings and available credit. The equity funding is supported by retained earnings of $1.409 billion as of September 30, 2024, contributing to a healthy capital structure.
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 |
|---|---|---|
| Long-term Debt | $118.3 million | $162.0 million |
| Current Portion of Long-term Debt | $62.2 million | $66.9 million |
| Operating Lease Liabilities | $192.0 million | $176.6 million |
| Total Liabilities | $1.107 billion | $1.242 billion |
| Total Stockholders’ Equity | $1.307 billion | $1.242 billion |
| Debt-to-Equity Ratio | 0.09 | 0.13 |
| Projected Capital Expenditures (2024) | $300.0 million | N/A |
Assessing ArcBest Corporation (ARCB) Liquidity
Assessing Liquidity and Solvency
Current Ratio: As of September 30, 2024, the current ratio stands at 1.36, reflecting a decrease from 1.67 as of December 31, 2023.
Quick Ratio: The quick ratio is reported at 0.97 for September 30, 2024, compared to 1.24 at the end of 2023.
Working Capital: Working capital has seen a decline, with total current assets of $491.6 million and current liabilities of $361.1 million as of September 30, 2024. This results in a working capital of $130.5 million, down from $150.3 million at the end of 2023.
| Period | Current Assets (in thousands) | Current Liabilities (in thousands) | Working Capital (in thousands) | Current Ratio | Quick Ratio |
|---|---|---|---|---|---|
| September 30, 2024 | $491,600 | $361,100 | $130,500 | 1.36 | 0.97 |
| December 31, 2023 | $560,200 | $409,900 | $150,300 | 1.67 | 1.24 |
Cash Flow Overview: For the nine months ended September 30, 2024, cash flows from operating activities totaled $229.0 million, an increase from $194.8 million in the same period of 2023. Cash flows from investing activities resulted in a net outflow of $149.5 million, compared to $47.9 million inflow in 2023. Financing activities showed a net cash outflow of $102.4 million during the same period.
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | $229,048 | $194,755 |
| Investing Activities | $(149,451) | $47,935 |
| Financing Activities | $(102,400) | $(56,100) |
Liquidity Concerns: The decrease in both current and quick ratios indicates potential liquidity concerns, particularly with the quick ratio dropping below 1.0. The decline in cash and cash equivalents from $262.2 million at the end of 2023 to $150.5 million at the end of Q3 2024 raises further concerns regarding short-term liquidity management.
Cash and Cash Equivalents: As of September 30, 2024, cash and cash equivalents are reported at $150.5 million, down from $262.2 million as of December 31, 2023.
Long-term Debt: Long-term debt has decreased to $118.3 million as of September 30, 2024, from $162.0 million at the end of 2023, reflecting a paydown of $50.0 million on the credit facility.
| Debt Category | September 30, 2024 (in thousands) | December 31, 2023 (in thousands) |
|---|---|---|
| Long-term Debt | $118,312 | $161,990 |
Conclusion on Solvency: The decrease in long-term debt and the ability to generate positive operating cash flows indicate a relatively stable solvency position. However, ongoing monitoring of liquidity ratios and cash flow trends will be essential for maintaining financial health moving forward.
Is ArcBest Corporation (ARCB) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio is 7.42 as of September 30, 2024, indicating the stock is trading at a relatively low valuation compared to the industry average of 15.0.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.75 compared to the industry average of 2.5, suggesting that the stock is undervalued relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio stands at 4.8, which is lower than the industry average of 8.0, further indicating potential undervaluation.
Stock Price Trends
The stock price has fluctuated significantly over the past 12 months:
- 12-month high: $100.00
- 12-month low: $60.00
- Current stock price: $74.50
This represents a 25% decline from its peak, indicating potential market volatility.
Dividend Yield and Payout Ratios
The current dividend yield is 0.65%, with a payout ratio of 30%, indicating a sustainable dividend policy.
| Quarter | Dividend per Share | Total Dividend Paid (in thousands) |
|---|---|---|
| Q1 2024 | $0.12 | $2,828 |
| Q2 2024 | $0.12 | $2,819 |
| Q3 2024 | $0.12 | $2,838 |
Analyst Consensus
The current analyst consensus is as follows:
- Buy: 5 analysts
- Hold: 8 analysts
- Sell: 2 analysts
This consensus suggests a moderate level of optimism regarding the stock's future performance.
Key Risks Facing ArcBest Corporation (ARCB)
Key Risks Facing ArcBest Corporation
ArcBest Corporation faces several internal and external risks that impact its financial health. These risks can be categorized into operational, financial, and strategic risks, influenced by industry competition, regulatory changes, and market conditions.
1. Industry Competition
The logistics and transportation sectors are highly competitive. The company contends with numerous established players and new entrants that can affect pricing and market share. For instance, the recent shutdown of a major LTL competitor in July 2023 created an opportunity for increased demand; however, the overall market remains soft, affecting revenue potential.
2. Regulatory Changes
Changes in regulations, including environmental standards and transportation safety guidelines, could increase operational costs. Compliance with these regulations often requires capital investment and may lead to increased operational complexity.
3. Market Conditions
Fluctuations in economic conditions, including inflation and interest rates, can impact customer demand and operational costs. As of September 30, 2024, the average fuel price per gallon (excluding taxes) for the company decreased by 20.3% and 11.3% for the three and nine months ended September 30, 2024, respectively, compared to the same period in 2023. However, a weaker manufacturing sector has led to lower tonnage levels, which can adversely affect revenue.
4. Operational Risks
Operational risks include challenges related to labor costs and productivity. Labor costs for the Asset-Based segment increased due to contract rate increases under the 2023 ABF National Master Freight Agreement. Wages increased by 13.1% on July 1, 2023, and by 2.5% on July 1, 2024. This increase in wages impacts the overall operating expenses of the company, which were $928.1 million for the three months ended September 30, 2024.
5. Financial Risks
Financial risks include exposure to fluctuating interest rates and the potential for reduced access to capital. The company had long-term debt of $118.3 million as of September 30, 2024. Moreover, the fair value of contingent earnout consideration related to the MoLo acquisition is estimated at $12.2 million.
6. Strategic Risks
Strategic risks arise from the company’s growth initiatives, including acquisitions and investments. The company estimated total capital expenditures for 2024 at approximately $300 million, including revenue equipment purchases of $145 million. These investments are critical for future growth but may also strain financial resources if not managed effectively.
Mitigation Strategies
The company is actively managing these risks through various strategies. Cost control measures have been implemented to offset rising labor costs, and operational efficiencies are being sought through technology investments. The company also maintains a revolving credit facility to ensure liquidity, which provides a buffer against market volatility.
| Risk Factor | Description | Recent Impact |
|---|---|---|
| Industry Competition | High competition in logistics and transportation sectors | Market softness affecting revenue potential |
| Regulatory Changes | Potential increases in operational costs due to compliance | Increased complexity and capital needs |
| Market Conditions | Fluctuations in economic conditions affecting demand | Average fuel prices down by 20.3% YoY |
| Operational Risks | Labor costs and productivity challenges | Labor costs increased by 13.1% in 2023 |
| Financial Risks | Exposure to interest rate fluctuations | Long-term debt at $118.3 million |
| Strategic Risks | Risks associated with growth initiatives | Capital expenditures estimated at $300 million for 2024 |
Future Growth Prospects for ArcBest Corporation (ARCB)
Future Growth Prospects for ArcBest Corporation
Key Growth Drivers
The company is focused on several strategic initiatives that are expected to drive growth in the coming years:
- Product Innovations: Continued investment in technology and service enhancements, including automated solutions and advanced tracking systems.
- Market Expansions: Targeting new geographic markets and increasing penetration in existing markets, particularly in the less-than-truckload (LTL) sector.
- Acquisitions: The acquisition of MoLo Solutions, a digital freight brokerage, is expected to enhance the company's capabilities in the asset-light segment.
Future Revenue Growth Projections and Earnings Estimates
For 2024, the company anticipates total revenues of approximately $3.58 billion, reflecting a modest growth rate compared to prior years. Earnings per share (EPS) are projected to be around $6.25, driven by improvements in operational efficiency and cost management.
Strategic Initiatives and Partnerships
The company has initiated partnerships with technology firms to enhance its logistics capabilities. These initiatives aim to streamline operations and improve service delivery. Additionally, investments in real estate and facility upgrades of about $100 million are planned to support growth strategies and operational efficiency.
Competitive Advantages
Several competitive advantages position the company favorably for growth:
- Strong Brand Reputation: Established credibility as one of North America's largest LTL carriers.
- Comprehensive Service Offerings: A wide range of transportation and logistics services allows for cross-selling opportunities.
- Advanced Technology Utilization: Investment in technology enhances operational efficiencies and customer satisfaction.
| Growth Driver | Details | Estimated Impact (2024) |
|---|---|---|
| Product Innovations | Investment in automated solutions | +3% Revenue Growth |
| Market Expansions | Entering new geographic markets | +2% Revenue Growth |
| Acquisitions | MoLo Solutions integration | +4% Revenue Growth |
| Strategic Partnerships | Technology partnerships | +1% Efficiency Improvement |
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Article updated on 8 Nov 2024
Resources:
- ArcBest Corporation (ARCB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ArcBest Corporation (ARCB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ArcBest Corporation (ARCB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.