Well, this is encouraging. J.B. Hunt (NASDAQ:JBHT), a large truckload carrier, posted good results last week and now Arkansas Best (NASDAQ:ABFS), a large "less-than-truckload" carrier, starts this week off on the right foot. And lucky for it, it announced good earnings on a day when the market is in a good mood and willing to reward shareholders.
Second-quarter revenue was up 12%, as reported, and would have been up about 8% even without the benefit of fuel surcharges. Profitability also improved notably: Operating income rose 24%, and Arkansas Best's operating ratio (sort of like the inverse of operating margin) improved to 90.1. Investors should also note that the results from the company's Clipper business are now considered discontinued operations because it has agreed to sell that business.
The various metrics of truckingdom looked pretty good to my Foolish eyes. Arkansas Best's tonnage was up 6.4% and weight per shipment was up 4.7%. On the pricing side, revenue per hundredweight rose 5.5% and revenue per hundredweight excluding the fuel surcharge was up 1.9%. Now that's not the same caliber of price hikes that we're seeing at CSX (NYSE:CSX) or other rails, but it's not bad either, especially because the year-ago comparison was pretty tough as well.
As I see it, Arkansas Best offers investors a mix of the good and not-as-good in a trucking investment. The fine historical returns on capital are a big positive. The heavily unionized labor force is a positive so long as relations remain good (as it seems to attract a higher caliber of driver). What's not so good, though, is the company's focus on the longer-haul market in an environment when more regional players like Old Dominion (NASDAQ:ODFL) are experiencing better growth. Nevertheless, it's not as though Arkansas Best doesn't play there: Its freight traveling less than 800 miles was up more than 10% this quarter.
I'd like to leave off this discussion with a quote from the conference call, perhaps one of the greatest quotes in the long years I've listened to calls. This was an answer from CEO Robert Davidson in response to an analyst's attempt to (in my opinion) get a mite overly specific on the impact of the Fourth of July on results:
"We discovered that July Fourth is in July this year and also happened the same time last year, which is kind of the trend."
Keep on trucking with more Foolishness:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
