ArcBest Lowers Third Quarter Profit Margin Forecast Due to Weak Demand, Rising Costs

ArcBest, a prominent transportation company, has revised its profit margin expectations for the third quarter due to weak demand and rising costs. The company's asset-intensive business segment, which includes ABF Freight, saw a slight year-over-year increase in revenue for August, while July's revenue remained flat compared to the previous year. However, persistent macroeconomic pressures and rising costs have led ArcBest to lower its profit margin forecast for this segment.

The daily revenue for the asset-intensive business, including ABF Freight, increased by 2% year-over-year in August. This growth was primarily driven by a 2% increase in freight volume, while the average revenue per unit remained unchanged from the previous year. The increase in freight volume was a result of a 5% rise in daily shipments, offset by a 3% decrease in the weight per shipment. The company's core customers saw an increase in freight volume, but overall demand from the manufacturing and real estate sectors remained weak, leading to a decrease in the weight per shipment.

ArcBest has also noted that the higher costs associated with short-haul transportation are contributing to the decline in third-quarter performance. The company is currently relying more on external transportation capacity to handle recent market gains, but expects these costs to decrease as it staffs up at relevant business locations. Additionally, recent pricing assessments have identified adjustments at the customer account and route levels, which are expected to improve overall pricing for less-than-truckload (LTL) services and enhance profitability. Despite the decrease in weight per shipment, which has increased the revenue per unit calculation, ArcBest's revenue per unit has shown a slight year-over-year decline in recent months.

ArcBest has maintained its guidance for the third quarter's operating ratio for its asset-light business segment, which includes freight brokerage services. The company expects this segment's adjusted operating income to be in the range of "break-even to 100 million." In the first two months of the third quarter, revenue for the asset-light business decreased by 8% year-over-year, despite a 2% increase in freight volume. This decrease was primarily due to a 10% year-over-year decline in revenue per shipment, with the former only partially offsetting the latter. The cost of purchased transportation, as a percentage of revenue, remained stable at 85%.