Leadership Transition - ArcBest's longtime leader, Judy McReynolds, will retire on December 31 [1] - Seth Runser, the company's president, will succeed Judy McReynolds [1]

Core Viewpoint - ArcBest (ARCB) is currently identified as a strong value stock, supported by its favorable valuation metrics and earnings outlook [4][9]. Valuation Metrics - ArcBest has a P/E ratio of 11.62, significantly lower than the industry average of 26.27 [4]. - The company holds a PEG ratio of 0.64, compared to the industry's average of 1.18, indicating potential undervaluation [5]. - ArcBest's P/B ratio is 1.35, which is attractive against the industry's average P/B of 3.60 [6]. - The P/S ratio for ArcBest is 0.43, while the industry average is 0.97, suggesting a favorable valuation [7]. - The P/CF ratio for ArcBest is 5.30, compared to the industry's average of 13.65, indicating strong cash flow relative to its market value [8]. Investment Outlook - The combination of these metrics suggests that ArcBest is likely undervalued, making it an appealing option for value investors [9].

Market Overview - The first half of 2025 experienced increased volatility and uncertainty due to President Trump's tariffs and a faster-than-expected cooling of inflation, leading to market recovery [1] - Recent months have shown favorable market conditions with easing trade tensions and a reduction in the Middle East crisis [1] Stock Performance and Recommendations - Optimism regarding artificial intelligence is expected to continue supporting stock prices, particularly in technology sectors [2] - Cooling inflation raises expectations for potential rate cuts starting in September 2025, contributing to a positive market outlook [2] - Stocks such as Cracker Barrel Old Country Store (CBRL), BGSF, ArcBest Corporation (ARCB), Cardinal Health (CAH), and AutoNation (AN) are recommended for monitoring as the second half of 2025 begins [2][6] Screening Strategy - A screening strategy has been developed to identify stocks based on improving broker recommendations and upward revisions in earnings estimates over the past four weeks [3] - The price/sales ratio is included as a valuation metric, focusing on companies with strong top-line performance [3] Screening Criteria - The top 75 companies with net upgrades in broker ratings over the last four weeks are identified [4] - The top 10 stocks with the highest percentage change in earnings estimates for the upcoming quarter are highlighted [4] - Companies in the bottom 10% of price-to-sales ratios are included for better valuation [4] Company Highlights - Cracker Barrel is focusing on menu innovation and pricing strategies to drive growth, introducing new offerings to attract customers [5] - BGSF has seen a 25% increase in shares over the past month and has a Zacks Rank 1, with earnings estimates rising over 300% in the last 60 days [7] - ArcBest is improving productivity and service quality, expecting a 52.1% increase in earnings per share for 2026 compared to 2025 [8] - Cardinal Health is undergoing strategic improvements to revitalize its business model, with its Medical segment expected to drive growth [9][10] - AutoNation's diversified product portfolio and strategic acquisitions support its market position, currently holding a Zacks Rank 3 [11]

Group 1 - ArcBest Corporation (NASDAQ: ARCB) is experiencing positive revenue growth momentum, with tonnage per day turning positive in April and May [1] - The expectation is for continued growth due to improving macroeconomic conditions and effective execution by the company [1] Group 2 - The analyst has over 15 years of investment experience, focusing on mid-sized hedge funds and has a background in sell-side analysis [1] - The investment strategy is medium-term, targeting ideas with catalysts for value unlocking or short selling in case of downside catalysts [1] - The analyst has a generalist approach but has primarily analyzed industrial, consumer, and technology sectors, where higher conviction in investments is noted [1]

Core Insights - BofA Securities analyst Ken Hoexter upgraded ArcBest Corporation from Underperform to Neutral, raising the price target from $63 to $74, citing momentum in gaining market share among core customers [1] - The analyst increased the 2Q25 and full-year 2025 EPS estimates by 1% to $1.60 and $5.85, respectively, reflecting stronger-than-expected second-quarter volume trends driven by growth in the core LTL business [2] - ArcBest's tons per day rose 5% over April, exceeding the typical 3% increase, while shipments per day were up 2%, compared to the usual 1%, attributed to gains in core and new accounts [3] Performance Metrics - ArcBest's performance is outpacing the industry, which is experiencing high-single-digit declines in volumes, while ArcBest's tons per day are up 5% year-over-year for the quarter to date [3] - The company typically sees a sequential margin improvement of 70 basis points from the second to third quarter, but Hoexter estimates a stronger 160-basis-point gain, projecting 3Q margins at 90.4% [7] - For the fourth quarter, Hoexter expects a 100-basis-point drop in margins, forecasting 4Q margins at 91.4% [7] Market Reaction - ArcBest shares are trading higher by 4.9% to $70.57 at the last check [8]

Investment Rating - The report does not explicitly state an investment rating for the transportation and logistics industry Core Insights - The report highlights a positive trend in U.S. imports, with a 6.1% week-over-week increase as of May 18, outperforming seasonal expectations by 980 basis points and showing a 2.8% year-over-year increase [2] - Spot rates for truckload transportation have surged, with dry van rates increasing by 6.1% week-over-week, outperforming historical averages [3] - There are concerns regarding potential freight demand impacts due to tariffs, with expectations of a flat outlook for dry van spot rates in 2026 [6] Summary by Sections Import & Congestion Monitor - Container bookings from China to the U.S. are at five-year lows, down 27% compared to 2023, indicating subdued future demand [2] - The report notes a recovery in container imports at the Port of LA/LB, which increased by 24% week-over-week [2] Truckload and Rail Data - Spot rates for dry van, reefers, and flatbed have all increased week-over-week, with dry van rates now 4% higher year-over-year [3] - The dry van load-to-truck ratio increased by 57% week-over-week, indicating a tightening market [6] - Rail management teams express skepticism about the feasibility of transcontinental mergers due to regulatory barriers [7] Airfreight & Surface Transportation - Airfreight rates have been monitored closely due to tariff implications, with significant declines observed in key freight lanes, particularly the China-U.S. lane, which fell by 6% week-over-week [10] - The overall airfreight market is experiencing broad-based weakness, with all major lanes underperforming seasonal expectations year-to-date [10] Rail Performance - The report card for railroads indicates varying performance levels, with some railroads rated as excellent while others are fair or poor [9] - Regulatory challenges are highlighted as a significant barrier to potential mergers in the rail industry, with environmental impact studies being particularly burdensome [7]

Financial Performance - Consolidated revenues for the three months ended March 31, 2025, decreased by 6.7% to $967,077,000 compared to $1,036,419,000 in the same period of 2024[81]. - Total consolidated operating income fell to $6,630,000 from $22,435,000 year-over-year, reflecting the revenue decline[81]. - Net income from continuing operations was $3,131,000, a significant improvement from a net loss of $2,912,000 in the prior year[81]. - Adjusted EBITDA from continuing operations decreased to $49,276,000 from $73,332,000 year-over-year[93]. Revenue Breakdown - Asset-Based revenues declined by 3.7% to $646,294,000, while Asset-Light revenues decreased by 10.2% to $356,012,000 for the same period[83]. - The Asset-Light segment accounted for approximately 36% of total revenues in Q1 2025, down from 37% in Q1 2024[85]. - The Asset-Based segment revenues for Q1 2025 totaled $646.3 million, a decrease of 3.9% from $671.5 million in Q1 2024, primarily due to a 4.3% decrease in tonnage per day[104]. - The Asset-Light segment revenues decreased by 10.2% to $356.0 million in Q1 2025 from $396.4 million in Q1 2024, impacted by lower average revenue per shipment and a decrease in average daily shipments[124]. Operating Results - Innovative technology costs related to the Vaux™ program decreased operating results by $7.5 million (pre-tax) for Q1 2025, compared to $9.7 million (pre-tax) in Q1 2024[87]. - Operating income for the Asset-Based segment was $26.4 million in Q1 2025, down from $53.5 million in Q1 2024, reflecting a decline in revenues while operating expenses remained consistent[109]. - The Asset-Light segment operating loss improved to $4.4 million in Q1 2025 from a loss of $15.3 million in Q1 2024, driven by decreased operating expenses despite lower revenues[125]. - The Asset-Based segment's operating ratio increased to 95.9% in Q1 2025 from 92.0% in Q1 2024, with salaries, wages, and benefits rising to 53.2% of revenues from 51.4%[101]. Expenses and Costs - Purchased transportation costs decreased by $39.5 million, resulting in a 1.2 percentage point reduction as a percentage of revenue for Q1 2025 compared to Q1 2024[127]. - Salaries, wages, and benefits decreased by $4.8 million, with a 0.4 percentage point reduction as a percentage of revenue for Q1 2025 compared to Q1 2024[129]. - The Asset-Light segment's operating expenses decreased by $51.2 million in Q1 2025 compared to the prior year, with a reduction in the operating ratio to 101.2% from 103.8%[126]. Cash Flow and Capital Expenditures - Cash and cash equivalents decreased by $58.5 million from December 31, 2024, to March 31, 2025, totaling $74.1 million[148]. - Cash used in operating activities was $22.3 million in Q1 2025, compared to $6.5 million of cash provided in Q1 2024[150]. - Cash used in investing activities was $11.2 million in Q1 2025, down from $53.8 million in Q1 2024[151]. - Total capital expenditures for 2025 are estimated to range from $225.0 million to $275.0 million, including $130.0 million to $140.0 million for revenue equipment purchases and $60.0 million to $80.0 million for real estate and facility upgrades[159]. Debt and Obligations - Future payments due under notes payable totaled $233.1 million as of March 31, 2025, an increase of $27.6 million from December 31, 2024[153]. - The company reported a $25.1 million increase in long-term debt from December 31, 2024, primarily due to a $25.0 million borrowing on the Credit Facility during the first quarter of 2025[166]. - Contractual obligations for operating lease liabilities totaled $307.4 million as of March 31, 2025, reflecting an increase of $39.8 million from December 31, 2024[156]. Market Risks - The economic environment remains uncertain, with increased recession risk and challenges from inflation and supply chain disruptions impacting demand for services[133]. - The company's primary market risk arises from fluctuations in interest rates due to its debt portfolio, which includes fixed-rate notes payable[181]. - Future issuances of long-term debt may be affected by rising interest rates, potentially leading to increased interest costs[181]. - Borrowings under the revolving credit facility and accounts receivable securitization program are subject to variable interest rates, exposing the company to interest rate risk[181].

Financial Data and Key Metrics Changes - Consolidated revenue decreased by 7% year-over-year to $967 million, with non-GAAP operating income from continuing operations at $17 million compared to $43 million in the prior year [22] - Adjusted earnings per share were $0.51, down from $1.34 in Q1 2024 [22] - The Asset Based segment saw a $27 million decrease in operating income, while the Asset Light segment's non-GAAP operating loss improved by $4 million year-over-year [22] Business Line Data and Key Metrics Changes - Asset Based business revenue was $646 million, a daily decrease of 3%, with an operating ratio of 95.9%, an increase of 390 basis points year-over-year [23] - Daily shipments in the Asset Based segment were flat year-over-year, while weight per shipment decreased by 4%, leading to a 4% decrease in tons per day [23] - Asset Light segment revenue was $356 million, a daily decrease of 9%, with shipments per day down 4% [28] Market Data and Key Metrics Changes - In April 2025, the Asset Based business achieved a 4% year-over-year increase in daily shipments, despite a 3% decrease in weight per shipment [26] - The pricing environment remains rational, with a 4.9% average increase on contract renewals during the quarter [25][51] - The company anticipates a non-GAAP operating loss for the Asset Light segment of between $1 million and $2 million for Q2 2025 [30] Company Strategy and Development Direction - The company is focused on driving profitable growth, advancing premium service for customers, and optimizing efficiency [11] - Investments in technology and operational efficiency are expected to enhance service levels and reduce costs [89] - The company is adapting to changes in trade policies and tariffs, aiming to support customers in navigating these challenges [5][32] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term value despite challenges in the freight environment [10] - The leadership team highlighted a disciplined approach to pricing and operational efficiency to outpace rising costs [25][66] - Management noted that customer relationships remain strong, with 80% of revenue coming from long-term customers [67] Other Important Information - The company has a capital expenditure guidance of $225 million to $275 million for 2025, focusing on maintenance and strategic investments [30] - Approximately $350 million in available liquidity is reported, indicating a strong balance sheet [31] Q&A Session Summary Question: Near term setup and profitability outlook - Management expects normal seasonality to drive revenue increases and continues to target cost reductions aligned with business levels [34][36] Question: Tonnage and revenue per hundredweight trends - Management noted a 1% sequential increase in tonnage but a 1% decrease in revenue per hundredweight, attributing this to a mix of easier-to-handle shipments [38][66] Question: Pricing environment and competitive landscape - Management indicated that the pricing environment remains rational, with no significant pressure from competitors to lower prices [51][52] Question: Retail exposure and inbound traffic from China - The company has around 10% exposure to the retail sector, with varying impacts from inbound traffic from China [78] Question: Strategies in a stagflation environment - Management emphasized operational efficiencies and strategic investments to navigate inflationary pressures while maintaining service levels [88][91]

Core Insights - ArcBest reported revenue of $967.08 million for the quarter ended March 2025, a decrease of 6.7% year-over-year, and EPS of $0.51, down from $1.34 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $981.56 million by 1.48%, and the EPS was also below the consensus estimate of $0.52 by 1.92% [1] Financial Performance Metrics - ArcBest's shares have declined by 16.3% over the past month, contrasting with the Zacks S&P 500 composite's decline of 0.8%, indicating potential underperformance in the near term with a Zacks Rank 4 (Sell) [3] - The Asset-Light Operating Ratio was reported at 101.2%, slightly better than the average estimate of 101.6% from three analysts [4] - The Asset-Based Operating Ratio was 95.9%, aligning closely with the average estimate of 95.7% from three analysts [4] - Asset-Based revenues were reported at $646.29 million, a decrease of 3.8% year-over-year, compared to the average estimate of $647.61 million from four analysts [4] - Asset-Light revenues were reported at $356.01 million, down 10.2% year-over-year, against the average estimate of $366.20 million from four analysts [4] - The reported revenue from Other and eliminations was -$35.23 million, worse than the average estimate of -$31.14 million from three analysts, but showed a year-over-year improvement of 12.2% [4]

Financial Data and Key Metrics Changes - Consolidated revenue decreased by 7% year-over-year to $967 million, with non-GAAP operating income from continuing operations at $17 million compared to $43 million in the prior year [24] - Adjusted earnings per share were $0.51, down from $1.34 in Q1 2024 [24] - The Asset Based segment saw a $27 million decrease in operating income, while the Asset Light segment's non-GAAP operating loss improved to $1 million from $4 million the previous year [24] Business Line Data and Key Metrics Changes - Asset Based business revenue was $646 million, a daily decrease of 3%, with an operating ratio of 95.9%, an increase of 390 basis points year-over-year [25] - Daily shipments in the Asset Based segment were flat year-over-year, while weight per shipment decreased by 4%, resulting in a 4% decrease in tons per day [25] - Asset Light segment revenue was $356 million, a daily decrease of 9%, with shipments per day down 4% due to a strategic reduction in less profitable truckload volumes [29] Market Data and Key Metrics Changes - In April 2025, the Asset Based business achieved a 4% year-over-year increase in daily shipments, despite a 3% decrease in weight per shipment [28] - The pricing environment remains rational, with a 4.9% average increase on contract renewals during the quarter [27][53] - The company noted a decline in shipments within the manufacturing vertical, impacting revenue per hundredweight [28] Company Strategy and Development Direction - The company is focused on driving profitable growth, advancing premium service for customers, and optimizing efficiency [13] - Investments in technology and operational efficiency are expected to enhance service levels and reduce costs [89] - The company is adapting to changes in trade policies and tariffs, aiming to support customers in navigating these challenges [6][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver long-term value despite challenges in the freight environment [12] - The leadership team highlighted a disciplined approach to pricing and operational efficiency to outpace rising costs [27][41] - Management noted that while external factors are unpredictable, the company is focused on controlling its operations and maintaining financial discipline [32] Other Important Information - The company expects capital expenditures for 2025 to be between $225 million and $275 million, focusing on maintenance and strategic investments [31] - The company has approximately $350 million in available liquidity, indicating a strong balance sheet [32] Q&A Session Summary Question: Near term setup and profitability targets - Management expects normal seasonality to drive revenue increases and continues to implement cost initiatives to align workforce with business levels [36][38] Question: Tonnage and revenue per hundredweight trends - Management noted a 1% sequential increase in tonnage but a 1% decrease in revenue per hundredweight, attributing this to a mix of easier-to-handle shipments [40][44] Question: Competitive environment and pricing dynamics - Management emphasized that the pricing environment remains rational, with no significant pressure from competitors to lower prices [53][66] Question: Retail exposure and inbound traffic from China - The company has around 10% exposure to the retail sector, with variations between asset-based and asset-light businesses [80] Question: Strategies in a stagflation environment - Management highlighted operational efficiencies and strategic investments as key levers to navigate inflationary pressures [88][91]