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UPDATE: Credit Suisse Starts ArcBest Corp (ARCB) at Outperform

June 27, 2022 4:20 PM EDT
Get Alerts ARCB Hot Sheet
Price: $89.47 --0%

Rating Summary:
    8 Buy, 6 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 9 | Down: 28 | New: 7
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(Updated - June 27, 2022 4:27 PM EDT)

Credit Suisse analyst Ariel Rosa initiates coverage on ArcBest Corp (NASDAQ: ARCB) with a Outperform rating and a price target of $102.00.

The analyst comments "We initiate coverage of ArcBest with an Outperform rating and a $102 target price. ARCB is a top 10 Less-than-Truckload carrier (ranked number 7 on Transport Topics list for 2021). It is one of three LTL carriers in the top 10 that operates with a highly unionized workforce. The company has recognized that it is at a competitive disadvantage given comparatively higher fringe and benefit costs (we believe ArcBest operates with an approximate 700- 800bps structural margin disadvantage relative to best-in-class non-union peers). Partly because of this, ARCB is the cheapest stock in our coverage at just 5.3x our 2022 EPS estimate of $13.55. It has an attractive 12% free cash flow yield (the highest in our coverage). The company has demonstrated strong performance over the past few years, yet its current multiple reflects significant skepticism as to the sustainability of those results, in our view. Between 2004 and 2020, ARCB stock delivered hardly any return to shareholders, trading in a range of $20-$40 per share for more than a decade. This occurred at a time when many of its LTL peers saw significant advances in their share prices and significant improvements in their financial performance as ArcBest ceded market share to its non-union competitors. As such, we understand why skepticism surrounds the company’s ability to sustain its recent strong financial performance. Alternatively, if it can sustain these results as demand normalizes, particularly an LTL operating ratio below 90%, it could see considerable upside to its share price. The other key question, in our view, is to what extent its AssetLight business can contribute to the company’s overall financial performance, as both a source of diversification and as a driver of earnings growth."

For an analyst ratings summary and ratings history on ArcBest Corp click here. For more ratings news on ArcBest Corp click here.

Shares of ArcBest Corp closed at $71.48 yesterday.


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