ArcBest saw tonnage fall again in November as it continues to use a favorable less-than-truckload capacity backdrop following Yellow’s shutdown to further unwind dynamic pricing initiatives.
A Tuesday filing with the Securities and Exchange Commission showed tonnage in the company’s asset-based segment, which includes LTL carrier ABF Freight, was off 10% year over year (y/y) in November following a 4% decline in October. The carrier had the benefit of negative comps from a year ago (down 3.9% and 3.3% y/y in October and November 2022, respectively.)
“The company has reduced shipments sourced from the Asset-Based tech-enabled dynamic LTL-rated, market-based pricing program in November 2023 compared to the prior year to optimize operating income and service,” the filing read.
ArcBest (NASDAQ: ARCB) began using dynamic pricing more heavily late last year after the market rolled over. The strategy utilizes technology to better match available capacity in the network with noncontractual shipment opportunities in the market. The goal of the effort is to prop up throughput at its terminals with profitable freight, albeit freight that is not as well priced as what it sees from core accounts.
The carrier’s shipments were off 5% y/y in November following a 3.7% increase in October. Mid-single-digit declines in weight per shipment bridged the gap to the tonnage declines.
On its third-quarter call at the end of October, management said shipments from core customers, which carry better margins, were up 20% sequentially from the second quarter.
Revenue per hundredweight, or yield, improved again as “pricing discipline in the industry remains strong,” the filing read. Yield was up 8.1% y/y in October and 6% in November. Stacking the current results with prior-year monthly gains shows increases of 19% and 13%, respectively.
Lower diesel prices (down 17% y/y in the first two months of the fourth quarter) have been a headwind to yields, but declines in shipment weights have been a notable tailwind for the metric.
Table: Company reports
The company also said Tuesday it “continues to see results from its cost reduction efforts while preserving the ability to serve customers as macro conditions improve.” Over the past year, management has credited dynamic pricing with allowing it to avoid significant staff reductions, which prove cumbersome when demand turns.
Industrial freight demand, which can account for roughly two-thirds of a carrier’s total volume, remains under water. The November Manufacturing Purchasing Managers’ Index was in contraction territory for a 13th straight month at 46.7.
ArcBest’s asset-based unit normally sees 100 to 300 basis points of operating ratio deterioration from the third to the fourth quarter. The Tuesday update calls for the metric to be flat to slightly better this year, which is a little worse than an indication of 100 to 200 bps of improvement provided on the October call.
The company’s asset-light segment, which includes truckload brokerage, reported a 15% y/y decline in revenue per day during October and November. Shipments were off by mid-single digits while revenue per shipment was down by mid-teens percentages.
“The year-over-year changes in Asset-Light revenue per day results primarily reflect continued softness in the truckload brokerage market offset by continued growth in the company’s managed transportation solutions business,” the update stated.
The unit is expected to see sequential improvement from the third quarter’s adjusted operating loss of $3.9 million.
Late Monday, a Delaware bankruptcy court filing showed ArcBest’s real estate arm had a $30.2 million winning bid for three of Yellow’s terminals.
Shares of ARCB were down 9.1% at 2:41 p.m. EST on Tuesday compared to the S&P 500, which was off 0.1%.
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