ArcBest Corporation (ARCB) is a multi-billion-dollar integrated logistics and freight transportation company operating in three segments: Asset-Based; ArcBest; and FleetNet. With more than 14,00 employees operating across 250 service centers and campuses, ARCB is a logistics powerhouse. The Fort Smith, Ariz.-based concern has an ISS QualityScore of 3, indicating relatively low governance risk.
ARCB benefitted immensely from increased demand for freight transportation and logistics services over the past year. The company achieved the highest revenue and net income in its history on a fiscal fourth quarter (ended December) and full-year basis in 2021.
Shares of ARCB have gained 20.6% in price over the past year to close the last trading session at $80.09.
Here is what could shape ARCB’s performance in the near term:
Record Financials
ARCB’s revenues increased 35.4% year-over-year to $3.98 billion in its fiscal year 2021 (ended December 31, 2021). Its operating income came in at $280.99 million, up 185.9% from the same period last year. Its EBT improved 199.6% from its year-ago value to $277.15 million. And its net income and EPS increased 200.3% and 196.7%, respectively, year-over-year to $213.52 million and $7.98. In addition, ARCB returned $116 million to shareholders through stock repurchase programs and dividends. This includes its accelerated $100 million share repurchase program completed in January 2022.
ARCB CEO Judy R. McReynolds said, “2021 was a year of immense challenges—from the ongoing pandemic to extreme supply chain pressures—but our team stayed focused on our strategic initiatives and consistently exceeded expectations. We are making smart investments across our business to advance our strategic vision and adapt to the rapidly evolving market environment, all while being true advisors to our customers.”
Impressive Growth Story
ARCB’s revenues have risen at an 8.8% CAGR over the past three years and at an 8.1% CAGR over the past five years. The company’s EBITDA has increased at a 19.4% rate per annum over the past three years and at a rate of 24.1% per annum over the past five years. In addition, ARCB’s net income and EPS both increased at a CAGR of 47% over the past three years and at CAGRs of 62.8% and 62.5%, respectively, over the past five years.
Furthermore, ARCB’s levered free cash flow has grown at a 19.8% CAGR over the past five years and 29.3% year-over-year.
Bullish Growth Prospects
Analysts expect ARCB’s revenues to rise 48.3% in its fiscal year 2022 first quarter (ending March), 34.4% in its fiscal second quarter (ending June), and 26.8% in the current year. The consensus EPS estimates indicate a 108.7% improvement in the current quarter, 44.4% in the next quarter, and 22.3% in fiscal 2022. In addition, the Street expects ARCB’s EPS to rise at a 33% CAGR over the next five years.
Consensus Rating and Price Target Indicate Potential Upside
Among the five Wall Street analysts that rated ARCB, four rated it Buy while one rated it Buy. The 12-month median price target of $132.00 indicates a 64.8% potential upside from yesterday’s closing price of $80.09. The price targets range from a low of $111.00 to a high of $145.00.
POWR Ratings Reflect Rosy Prospects
ARCB has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
ARCB has an A grade for Growth and a B for Value. The company’s impressive growth story justifies its Growth grade. In addition, the stock is currently trading 7.68 times its forward non-GAAP earnings, which is 55% lower than the 17.07x industry average, which is in sync with its Value grade.
Among the 22 stocks in the A-rated Trucking Freight industry, ARCB is ranked #4.
Beyond what I have stated above, view ARCB ratings for Sentiment, Stability, Momentum, and Quality here.
Note that ARCB is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Bottom Line
With solid financials and cash flows, ARCB is one of the leading global freight transportation companies. As Russia-Ukraine tensions escalate and economic sanctions intensify the current logistics gridlock, the demand for ARCB’s services is expected to rise significantly in the coming months. Furthermore, the company has been investing heavily in its integrated logistics solutions, innovations, and technology to strengthen its operations. Thus, we think that with its discounted valuation, the under-the-radar growth stock could be a profitable investment bet now.
How Does ArcBest Corporation (ARCB) Stack Up Against its Peers?
While ARCB has a B rating in our proprietary rating system, one might want to consider looking at its industry peers, P.A.M. Transportation Services, Inc. (PTSI), USA Truck, Inc. (USAK), and Daseke, Inc. (DSKE), which have an A (Strong Buy) rating.
Note that USAK is one of the few stocks handpicked by our Chief Value Strategist, Steve Reitmeister, currently in the POWR Value portfolio. Learn more here.
What To Do Next?
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ARCB shares were trading at $81.52 per share on Tuesday morning, up $1.43 (+1.79%). Year-to-date, ARCB has declined -31.92%, versus a -11.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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