ArcBest, LTLs remain in anticipation of a rebound

ArcBest Positions for Market Rebound

ArcBest is actively preparing its less-than-truckload (LTL) operations and asset-light division for a future uptick in demand. The company is banking on enhanced technology solutions and ongoing cost reduction efforts to boost profitability once the market recovers.

Fourth Quarter Financial Overview

On Friday, ArcBest (NASDAQ: ARCB) announced a net loss of $8.1 million, or $0.36 per share, for the fourth quarter. This figure includes a noncash impairment charge related to its asset-light segment and other nonrecurring expenses. Adjusted earnings per share came in at $0.36, falling short of last year’s result by $0.97 and missing analyst expectations by $0.06.

Total revenue for the quarter reached $973 million, surpassing projections by $6 million.

Key Performance Indicators

Asset-Based Segment: Challenges and Progress

The asset-based division, which encompasses ABF Freight, experienced a 1% year-over-year decrease in revenue to $649 million, with daily revenue down 0.3%. Daily tonnage rose by 3%, but yield (revenue per hundredweight) declined by 3%.

This tonnage growth resulted from a 2.4% rise in daily shipments (totaling 20,163) and a 0.3% increase in average shipment weight. However, heavier shipments and a 0.4% reduction in average haul length put slight pressure on yield.

New LTL customers with heavier freight helped counterbalance lighter shipments from longstanding manufacturing clients.

Contract renewals averaged a 5% increase during the quarter—the largest jump in six quarters—and were up 9.5% compared to two years ago. Management noted a slowdown in bidding activity and described the pricing environment as stable.

Tonnage and Revenue Trends

Each month of the quarter saw year-over-year tonnage improvements: October was down 1.2%, November rose 3.3%, and December climbed 6.7%. The fourth quarter benefited from a relatively easy comparison to the previous year, when tonnage had dropped 7.3%. However, comparisons will become more challenging from February onward, with a 2% decline expected, before turning positive in April with a 3.6% increase.

In January, daily revenue was unchanged from the prior year. An 8% increase in tonnage (against a tough -9.2% comparison) was offset by an 8% drop in yield. The month saw a higher proportion of dynamically priced truckload shipments, which pushed shipment weights up by 5% but reduced yield. Ongoing softness in manufacturing and housing has led ArcBest to accept more noncore LTL freight to maintain network utilization. For the first quarter, tonnage is projected to grow by 4% to 5% year over year.

SONAR: Longhaul LTL Monthly Cost per Hundredweight, Class 125+ Index. These indices reflect the median cost per hundredweight across four National Motor Freight Classification groups and five mileage ranges.

Operating Ratio and Cost Pressures

The asset-based segment reported an adjusted operating ratio of 96.2%, which was 420 basis points worse than the previous year and 370 basis points higher than the third quarter. This sequential decline was slightly better than management’s forecast of a 400 basis point drop. Typically, the fourth quarter sees a 100 to 200 basis point deterioration, but weaker demand and adverse weather contributed to a larger decline. Additionally, the fourth quarter of 2025 had three fewer working days compared to the third quarter.

Labor and Expense Trends

Labor and benefits costs, as a percentage of revenue, increased by 310 basis points year over year, driven by additional staffing to support shipment growth and annual union wage increases. Depreciation and amortization expenses also rose by 100 basis points.

Historically, the LTL operating ratio worsens by 260 basis points sequentially in the first quarter. ArcBest anticipates outperforming this trend in the current year, projecting a 100 to 200 basis point deterioration, which would result in a midpoint operating ratio of 97.7%—still 180 basis points higher than last year.

Efficiency Initiatives and Long-Term Goals

Training programs and technology upgrades across 60% of the network have delivered $24 million in annual savings. A city route optimization initiative has entered its next phases, already generating $15 million in cost reductions. The impact of startup costs for new and expanded facilities—adding 800 doors over the past year—will be better absorbed as volumes recover.

ArcBest reaffirmed its long-term targets shared at its September investor day, aiming for an operating ratio between 87% and 90% by 2028. This forecast assumes an annual 80 basis point positive gap between revenue per shipment and cost per shipment, though the fourth quarter saw a negative 430 basis point spread.

Asset-Light Segment: Mixed Results

The asset-light segment, which includes truck brokerage, broke even on an adjusted basis—outperforming management’s guidance, which had anticipated a loss of $1 million to $3 million. Revenue fell 6% year over year, with shipments per day up 1% and revenue per shipment down 6%.

Looking ahead, the asset-light division expects an operating loss of up to $1 million in the first quarter. Automation and artificial intelligence are helping to streamline operations and reduce costs. Notably, shipments handled per employee per day increased by 19% year over year in the fourth quarter.

Stock Performance

As of 1:37 p.m. EST on Friday, ArcBest shares were up 3.5%, while the S&P 500 had declined by 0.9%.