Management from logistics provider ArcBest Corp ARCB said during their third-quarter conference call with analysts on Tuesday that they are experiencing some of the best tonnage trends in company history. Asset-based revenue per day, including less-than-truckload (LTL) revenue, was up 9% year-over-year in October with tonnage increasing 10%.
Improvements in the industrial and housing sectors, along with very strong consumer spending, are driving the increase in demand. A survey of manufacturing supply executives, The Purchasing Managers' Index (PMI), jumped higher in October. The index climbed to 59.3% from 55.4% in September. A reading above 50% implies expansion in the U.S. manufacturing sector.
The October PMI report produced the fifth consecutive month the index was in growth territory. The new orders component increased 7.7 percentage points to 67.9% with customers' inventories ticking 1.2 points lower to 36.7%. Manufactured goods can represent more than 80% of tonnage for some LTL carriers.
The Fort Smith, Arkansas-based company reported third-quarter adjusted earnings per share of $1.22, well ahead of the consensus estimates ranging from 79 cents to 82 cents per share.
Third-quarter results
The asset-based division reported a 1% year-over-year increase in tonnage during the quarter. Tonnage turned positive on a year-over-year comparison in August, up 4%, accelerating to October's double-digit result. LTL tonnage increased in the mid-single-digit range while spot truckload (TL) tonnage fell by double digits.
Revenue per hundredweight, or yield, declined 2% year-over-year. LTL yield, excluding fuel surcharges, declined in the low-single-digit range as weight per shipment increased 7% on LTL shipments. Published rates improved by mid-single digits year-over-year with contractual renewals improving 2.5%
The asset-based division's operating ratio (OR) improved 80 basis points to 92.4%.
ArcBest's key performance indicators
When asked if ArcBest could see steady OR trends in the fourth quarter, compared to the normal 200 basis points of sequential degradation, management noted some uncertainty in the macro environment as well as increased costs — purchased transportation, nonunion employee bonuses and the return of most of its furloughed workers — as potential headwinds.
The asset-light segment reported a 6% year-over-year increase in revenue. The trend accelerated throughout the quarter. October revenue, excluding commercial vehicle maintenance and repair unit FleetNet, increased 31% year-over-year. The division posted a 97.8% OR, 80 basis points better year-over-year.
At the end of the quarter, ArcBest had $644 million in liquidity and a net cash position of $59 million, $18 million higher than the second quarter. Total net capital expenditures (net capex) are expected to amount to $90 million to $95 million in 2020. The range was lowered by $5 million at each end but still includes plans for $64 million in total revenue equipment purchases.
Shares of ACRB are up 8% on the day compared to the S&P 500, which is up more than 2%.
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