Second quarter net income of $4.878 million is a welcome sign for officials at Fort Smith-based Arkansas Best Corp., but was less that what Wall Street was expecting.
Per share net income was 18 cents. The consensus analyst estimate was 20 cents per share on total revenue of $572.48 million.
The quarterly net income was down 58.8% compared to the $11.8 million earned in the second quarter of 2012. However, the second quarter 2012 net income included an $8 million tax benefit.
Revenue during the quarter was $576.899 million, well ahead of the $510.543 million during the second quarter of 2012, and also ahead of the consensus estimate.
The second quarter gain followed a first quarter loss of $13.4 million.
"As economic growth remains moderate and inconsistent, Arkansas Best continues to make progress in positioning each of its companies for future success," Arkansas Best President and CEO Judy McReynolds said in the earnings statement. "ABF now looks toward a better future with lower costs and greater operational flexibility. Investments made in emerging, non-asset-based businesses are positively impacting our bottom line by improving the way we go to market as customers seek more end-to-end logistics solutions.”
For the first six months of 2013, the company has a loss of $8.517 million, more than the loss of $6.321 million during the same period in 2012. Operating revenue for the first half of the year is $1.097 billion, better than the $951.41 million during the same period of 2012.
In 2012, the transportation holding company posted a $7.7 million loss, a wide swing from the $6.159 million gain in 2011. The largest subsidiary of Arkansas Best is ABF Freight System, one of the largest less-than-truckload carriers in the U.S.
The company noted a major positive event during the quarter. The International Brotherhood of Teamsters announced June 27 that a new contract was approved, but some supplemental provisions were rejected.
Officials with Arkansas Best and the Teamsters have negotiated the rejected provisions, and the Teamsters announced Aug. 6 that ballots had been mailed to seven “local/area supplements” for approval. The ballot deadline is Aug. 28.
The contract, once fully ratified, will cover about 7,500 ABF employees who are members of the union. Most of those workers are drivers.
Brad Delco, an analyst with Stephens Inc., believes the new contract will be good for the bottom line of ABF Freight. He reiterated his “overweight” rate of Arkansas Best shares and raised the trade target from $18 per share to $30 per share.
However, the benefits of the new contract are not likely to begin until later in the third quarter.
"We achieved a major milestone for our company in recent weeks with the ratification of a national five-year labor contract at ABF and most supplemental agreements,” McReynolds said. “We expect to obtain employee ratification of all remaining supplements in the coming weeks. Once this important process is concluded, it will represent a pivotal moment for Arkansas Best, as we will be able to turn our undivided attention to driving improved profitability at ABF, while continuing the expansion and growth of our emerging businesses.”
The four non-asset based businesses generated 23% of the company’s total revenue during the quarter, and all have posted operating income gains during the first half of 2013.
Arkansas Best has been unable to post two consecutive years of income gains since 2008. The company posted a loss of $7.7 million loss in 2012. Net income for 2011 reached $6.159 million, a huge swing from the $32.693 million loss during 2010. The company posted a net income loss of $127.522 million loss in 2009, with $64 million representing an accounting charge. The company posted net income of $29.168 million in 2008.
Arkansas Best shares (NASDAQ: ABFS) closed Thursday (Aug.8 ) at $19.71. During the past 52 weeks the share price has ranged from a $24 high to a $6.43 low.