Top executives at ArcBest Corp., parent of less-than-truckload carrier ABF Freight System Inc., told analysts yesterday that the company plans to derive about 45 percent of its total revenue from non-LTL operations, up from about 29 percent currently, according to analysts attending the company's first-ever analyst day. Those plans were confirmed by a spokeswoman.
Fort Smith, Ark.-based ArcBest, formerly known as Arkansas Best Corp., expects to grow revenue by 10 percent a year through 2018 and nearly double its earnings before interest and taxes (EBIT), according to Scott Group, an analyst at investment firm Wolfe Research, who attended the New York event.
Kathy Fieweger, an ArcBest spokeswoman, confirmed the projections. "Overall revenue is projected to grow, with a greater proportion coming from asset-light businesses," she said in an e-mail.
Through the first nine months of 2015, the LTL unit generated revenues of $1.5 billion. The remaining operations, which include expedited-shipping provider Panther Premium Logistics Inc.; brokerage unit ABF Logistics; vehicle-maintenance and -repair provider FleetNet America; and household-goods mover ABF Moving, generated slightly less than $600 million in revenue. Year-over-year, LTL revenue was just slightly higher, while revenue from the so-called asset-light units grew about 12 percent, paced by strong demand for ABF Logistics' services. Panther, the largest of the asset-light operations, reported year-over-year revenue declines as the unit faced tough comparisons with a strong 2014, especially a record third quarter in revenue.
According to Group, management didn't spend much time talking about the LTL operations and didn't provide near-term updates on tonnage or pricing trends. Instead, it focused on the non-LTL segments, emphasizing abundant cross-selling opportunities and a growing market for truck brokerage services.
Group said management based its assumptions on 3- to 5-percent annualized GDP growth, projections the analyst said may prove optimistic. About 80 percent of ArcBest's revenue comes from LTL and the Panther unit, both cyclical businesses that may be vulnerable at this point in the economic cycle, Group said. He applauded ArcBest's long-term strategy to diversify away from LTL, but said weak tonnage and pricing trends in LTL may hamstring progress over the short term.