ArcBest's Q3 2025: Contradictions Emerge on Volume Decline, Pricing Strategy, and Market Conditions

Business Commentary:

* Volume and Market Share Growth: - ArcBest reported an increase in daily Asset-Based LTL shipments per day by 4% year-over-year, translating into market share gains. - This growth was supported by a refined go-to-market strategy and expansion of the core LTL business, despite challenges like higher-than-expected volumes and conservative hiring.

• Pricing Discipline and Profitability:
• ArcBest achieved a 4.5% average increase on deferred contract pricing renewals during Q3.
• This improvement in pricing discipline is attributed to data-driven account and lane-level performance evaluations, ensuring appropriate compensation for value delivered.

• Efficiency and Margin Improvement:
• The company's continuous improvement efforts delivered $20 million in savings year-to-date through service center visits and process improvements.
• These initiatives are supported by AI integration, enhancing productivity and mitigating inflationary cost pressures.

• Managed Solutions and Asset-Light Shipments:
• Shipments per day grew by double digits year-over-year in Managed Solutions, setting quarterly records for both revenue and volumes.
• This growth reflects ArcBest's ability to help customers adapt to a dynamic freight environment and drive cost efficiencies in their supply chains.

Contradiction Point 1

Volume Decline and Market Conditions

It involves differing perspectives on the factors contributing to volume declines, which impacts the understanding of market conditions and potential recovery, affecting investor trust and stock price volatility.

Are there any unusual seasonal factors affecting Q4 guidance? Or does normal seasonality lead to a year-over-year decline in 2026? - Jason Seidl(TD Cowen)

2025Q3: There has been some softness in October, with a step down in shipments below normal expectations. Factors include market conditions, inventory pull ahead in July, and the impact of the government shutdown. - Seth Runser(CFO)

Will August and September have easier revenue and tons per day comparisons, potentially leading to a stronger trend line? - Jordan Robert Alliger(Goldman Sachs)

2025Q2: Our volume was 94.8 million, down 0.7% year-over-year, which was better than our expectations entering the quarter. On a 2-week average basis, volumes were down 0.3% year-over-year. - Seth Runser(CFO)

Contradiction Point 2

Pricing Strategy and Pricing Improvement

It involves the company's approach to pricing strategy and the expected improvement in pricing, which affects revenue projections and competitive positioning.

How will the operating ratio progress in Q1? What factors contributed to the pricing weakness in October? - Brady Lierz(Stephens Inc.)

2025Q3: We're seeing improvement with our 4.5% renewal increase this quarter. We also have layering in, and we've talked about that, which is a holdover from the 5.9%. Folks are buying into it. - Eddie Sorg(CFO)

Can you elaborate on the 5.9% GRI strategy and early customer feedback? - Daniel Robert Imbro(Stephens Inc.)

2025Q2: In terms of pricing, we did the 5.9% GRI. And we've anecdotally heard from customers that they were expecting something more, so we think we got a little bit of a steal on that. - Eddie Sorg(CFO)

Contradiction Point 3

Volume Decline and Market Conditions

It reflects differing perspectives on the nature and reasons behind the volume decline in the LTL market, which directly impacts the company's revenue and market positioning.

What portion of the volume decline is cyclical versus structural, and how is Mastio tied to your strategic initiatives? - Ravi Shanker (Morgan Stanley)

2025Q3: Volume decline is cyclical, with customers shipping less. Service challenges were anticipated and addressed, improving internal metrics. - Seth Runser

Sequential growth in contract renewals and pricing environment in LTL? - Elliot Alper (TD Cowen)

2025Q1: The market remains rational with no aggressive pricing, allowing for good increases on renewals. Customers value our services, which supports the increases without sacrificing volume. - Eddie Sorg

Contradiction Point 4

Pricing Environment and Strategy

It highlights differing descriptions of the pricing environment and the company's strategic response, which are crucial for investor understanding of the company's competitive positioning and financial performance.

How do you expect the operating ratio to progress in Q1? What caused the pricing weakness in October? - Brady Lierz (Stephens Inc.)

2025Q3: Pricing has been progressing with a 4.5% renewal increase, showing consistent improvement. October faced account mix changes and macroeconomic headwinds. - Eddie Sorg

How do you view the pricing environment given peer negative pricing reports? - Ken Hoexter (Bank of America)

2025Q1: We're not seeing negative pricing or discounts like others. Our strategy is focused on capturing profitable core business and maintaining strong service levels amid challenging conditions. - Seth Runser