Citi Upgrades Rating, Raises PT To $28 On ABFS

Citi has upgraded its rating from Hold to Buy and has raised its price target from $26 to $28 on Arkansas Best Corp. ABFS, citing the company's efforts to recover from its 1Q11 miss as its rationale. Says Citi, in its report, “Following the company's admittedly poor performance executing on profitability improvement in 1Q11, we believe recent efforts to address underperforming customer accounts have begun to show results. Arkansas Best noted that it first realized that a number of accounts contained sub-standard fuel surcharge components in March, which along with underperforming accounts drove a very modest 1.3% increase in total yields and disappointed relative to our and consensus' expectations. Nevertheless, through the end of April, Arkansas Best noted that core pricing has improved by more than 300 bps sequentially to 2.5% YOY growth and total yields were up 9% including fuel. While the company highlighted it was only 60% through its book of underperforming accounts, we believe it has made better progress on surcharge compliance, which coupled with the strengthening industry pricing dynamic, could improve profitability faster than expected.” ABFS closed yesterday at $22.42.