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BofA Securities analyst Ken Hoexter upgraded ArcBest Corporation ARCB from Underperform to Neutral, raising the price target from $63 to $74.
Hoexter noted that ArcBest is showing momentum in gaining market share among core customers, which is helping offset pressure on core yield. Following a 20-minute discussion with CFO Matt Beasley, Hoexter expressed a more positive view of the company's progress within its core LTL operations.
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Reflecting this improved outlook, Hoexter increased the 2Q25 and full-year 2025 EPS estimates by 1% to $1.60 and $5.85, respectively.
Hoexter relayed that Beasley highlighted stronger-than-expected second-quarter volume trends at ArcBest, driven by broad-based growth in its core LTL business from both new and existing customers.
In May, tons per day rose 5% over April—exceeding the typical 3% increase—while shipments per day were up 2%, compared to the usual 1%.
Beasley attributed the strength to solid gains in core and new accounts, rather than transactional freight.
The analyst also noted ArcBest's performance is outpacing the industry, which is seeing high-single-digit declines in volumes, while ArcBest’s tons per day are up 5% year-over-year for the quarter to date.
Historically, the company sees a 4% rise in June tons/day and a 2% gain in shipments/day over May, followed by a typical 1% sequential decline in tons/day from 2Q to 3Q.
Hoexter maintains a forecast of -1% sequentially, or a 6% year-over-year gain.
Hoexter pointed out that ArcBest typically experiences a sequential margin improvement of 70 basis points from the second to third quarter, but his estimate reflects a stronger 160-basis-point gain, bringing projected 3Q margins to 90.4%.
Conversely, the company usually sees a 140-basis-point decline from the third to the fourth quarter, whereas Hoexter expects a steeper 100-basis-point drop, forecasting 4Q margins at 91.4%.
The analyst raised FY25 EPS forecast from $5.80 to $5.85.
Price Action: ARCB shares are trading higher by 4.9% to $70.57 at last check Tuesday.
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