2023 Q4 Carrier Earnings: ABF

Just an announcement before we get started:?

ABF Freight celebrated 100 years in business in 2023!?

They are now entering their 2nd century in business.??

Quite the story there, and hat’s off to ANY company that can make it 100 years (let alone still be a dominant force in the market)

Parent company ArcBest released their 4Q23 and Y2023 results earlier today….which is quite the story too.?

So…let’s get into the reports and see what has brought along such changes within their (now) century-old operations.?

In our latest Q4 Earnings analysis, we took a look at the results from XPO and broke down what their end-of-year performance and predictions look like going into 2024. Access that article here!

As we continue working through top-performing LTL carriers in the industry, we’ll keep conversations going throughout the year that will tie into what we discuss in these quarterly earnings analyses in 2024 and beyond.?

This quarterly series helps emphasize why these events are relevant to you as a shipper and breaks down what to do with the information we go over.

For more information or for answers to questions about how carrier performance reporting relates to your LTL, click here to connect with someone on our team today.

To get caught up with ABF, go back to our Q3 Earnings article for them HERE before getting started with this article.?

Otherwise, let's take a look at what management had to say:

?? Carrier #6: ABF Freight?

• ABF reported an OR of 87.7 - a full 1.7 points better than their 89.4 OR last year and 2.2 points better than their 89.9 OR just 3 months ago.??

Significant profit improvement taking place here- Which is Good for ABF, but it does make me pause. Why was OR better when Tonnage was down 7.8% and revenue was down 4.2% from Q3?

It can’t be that they were just that much more ‘efficient’ with labor, so that leads me to wonder if they just got some nice increases from their core enterprise customers.

So what is good for ABF on OR is potentially bad for their customers this time around, in relation to pricing.

• Revenue in Q4 was fairly flat, down -0.2% over last year. Tonnage was down -6.4% and shipments were flat at 0.0% change.??

• On a sequential basis, revenue was down -4.2%, tonnage was down -7.8%, and shipments were down -3.8%.?

Changes in the mix with the business gained from Yellow’s closure (+ transactional business lost due to price increases) fueled these results.

These trends are in line with nearly all of the other LTL carriers and it confirms 1 thing: The LTL market is SOFT.?

Revenue and Tonnage decreases from Q3 to Q4 don't make sense. Retail and Ecommerce sales were up significantly… so LTL should have had a nice little quarter.

Problem is, we are comparing to Q3. The Yellow bankruptcy put a bandaid over what we all know to be true at this point. The LTL market is at its ‘weakest’ for volumes in over 4 years.

Q3 was a mirage and now the harsh reality has set in for the LTL market.

To prove my point, take a look at the below metric:

• ArcBest reported that ABF participated in 90% more LTL bids in 2023 than they did in 2022 and won 150% more.??

Carriers don’t participate in that many bids unless they need new revenue. Net new revenue particularly.

I don’t have data on this yet, but anecdotally, I have seen a higher percentage of carriers participating in our RFPs for our carriers. I have not seen any CRAZY low prices yet, but participation is the leading indicator.?

IF conditions stay the same for volumes, this is the beginning of pricing power shifting back to shippers and away from LTL Carriers.

Now, back to your regularly scheduled programming:

Real quick…to give credit where credit is due…

• ABF is now a 10-time winner of the ATA's Excellence in Cargo Claims and Loss Prevention Award!!

They’re fairly well-known for their high level of cargo care, and this award backs it up.?

Very impressive!

Pricing Power ?? … everything else ??

• ABF secured 5.6% price increases on contract customers in Q4 of 2023.??

This is below where other carriers have reported to be, so it represents an elevated position for ABF.

• Shipments and tonnage have kept falling in 2024 relative to 2023 due to declines in transactional business caused by higher prices in this segment.?

ABF was pretty aggressive with transactional business in late 2022 and into early 2023, and we saw significant business growth from this segment (albeit at reduced margin) because of it.??

It seemed like ABF shed a lot more transactional business than gained on core business from Yellow… they may have been over-relying on transactional business earlier in 2023.?

Which brings me back to this gem from our Q3 Earnings analysis for ABF released in November:

But now that they’ve turned off that spigot mid-year, they can now benefit from profit improvement as transactional shipment counts continue to decline.

• Weight per shipment has declined significantly, and it comes from a combination of 3 factors:

1. new Yellow Corp business
2. a soft LTL environment
3. reduced transactional business?

Each has had a dampening impact on shipment size.

Conservative with CAPEX when others are NOT - why ???

• CAPEX in 2023 was $245M with $144M going to rolling stock.??

CAPEX for 2024 is projected at $325M to $375M, $130M of it slated for terminals, so they’re aiming far below some of their peers of similar size…

There’s obviously some strategy behind this. It could partly be due to an expectation that some carriers have “overspent on real estate”, OR they might be seeing alternate paths to gain the real estate they need for long-term growth.

As other carriers continue investing heavily in Yellow properties, ArcBest expects to see them raise their prices to pay for these large investments.??

ABF is sitting at roughly 15%-20% available capacity right now, so between more capacity available for their LTL Managed Trans division and better yield opportunities for ABF…

they’re already anticipating the potential gains they could receive from this.

• ABF has purchased 3 Yellow terminals and acquired a 4th leased facility…

Given the values placed on LTL properties via Yellow Corp’s auction process, they’re still planning to evaluate other investments and are open to further expansion.

• One of those “investments” can be seen in new tech capabilities; they’re launching a “real-time pre-pickup status updates” feature on their website.??

The goal: positioning their network for 25% growth long-term.??

Shifting their strategy with Transactional Business?

Shippers have a heightened interest to diversify their carrier base and share business amongst multiple carriers, rather than sole-source with one carrier.

• ABF feels they have their transactional business levels at the right place currently - that it’s at a more-optimal level than it was in 2023.??

While pricing up their transactional business has pushed shipment counts and tonnage down, it has helped significantly with improving margins.?

• The cost controls put into place at the end of 2023 are being multiplied by an improvement in freight profile as transactional business is pushed out of their network.?

Transactional shipments tend to have very low economies of scale on the origin and destination ends (relative to core business).

They also have higher costs to serve because of invoice challenges and administrative costs to serve.

?? Keeping their cards close to their chest

Management is cagey about confirming how much freight has moved on their Dynamic pricing program…

That’s one of the reasons for them not divulging revenue per cwt with and without fuel: it would open a door for analysts to possibly back into the figure since Dynamic Pricing has no fuel surcharge.

• Arcbest was not willing to release on-time performance or claims ratio data for ABF.

• Management also noted that ABF is not where they want to be with Mastio rankings.??

Service improvements are being made, and dramatic price changes (AKA cutting price on transactional business to gain it, then raising those prices to push it away) have impacted their rank.??

?? Coming Up Next: Tforce Freight

Next up on the list in our Q4 Earnings series is Tforce - they’re coming up on their 3-year anniversary of the purchase of UPS Freight (a unionized carrier) and will be one of the last carriers on deck for Earnings reports we cover this quarter.?

As the rest of the LTL carriers announce their Earnings results from Q423, we’ll bring our Q4 series to an end and await everyone’s 1Q24 Earnings results to keep the conversation going throughout the year.

Looking to diversify your LTL carrier portfolio? Rising LTL carrier profits like we see here mean it's time to test the field to ensure you're getting a fair rate. Click here to connect with someone on our team today.

This article was collaboratively written by “LTL Observers” - a collective of industry veterans spanning the carrier, shipper, 3PL, and tech provider spaces who are willing to share their opinions.

Disagree with these opinions? We'd love to add you to the line-up to make sure we're including a diverse set of LTL observers. Contact us today.