ArcBest (ARCB)

Freight Delivery Company ArcBest (NASDAQ:ARCB) beat Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 2.9% year on year to $972.7 million. Its non-GAAP profit of $0.36 per share was 13.8% below analysts’ consensus estimates.

Company Overview

Historically owning furniture, banking, and other subsidiaries, ArcBest (NASDAQ:ARCB) offers full-truckload, less-than-truckload, and intermodal deliveries of freight.

The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.

Competitors offering similar products include C.H. Robinson (NASDAQ:CHRW), FedEx (NYSE:FDX), and J.B. Hunt (NASDAQ:JBHT).

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, ArcBest grew its sales at a mediocre 6.4% compounded annual growth rate. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. ArcBest’s performance shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.8% annually.

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 20,163 in the latest quarter. Over the last two years, ArcBest’s units sold were flat. Because this number is better than its revenue growth, we can see the company’s average selling price decreased.

This quarter, ArcBest’s revenue fell by 2.9% year on year to $972.7 million but beat Wall Street’s estimates by 0.5%.

Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.

Gross profit margin is a critical metric to track because it sheds light on its pricing power, complexity of products, and ability to procure raw materials, equipment, and labor.

ArcBest has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 9.7% gross margin over the last five years. That means ArcBest paid its suppliers a lot of money ($90.29 for every $100 in revenue) to run its business.

ArcBest was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, ArcBest’s operating margin decreased by 4.8 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. ArcBest’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q4, ArcBest’s breakeven margin was down 4.7 percentage points year on year. The contraction shows it was less efficient because its expenses increased relative to its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

ArcBest’s EPS grew at a weak 2.8% compounded annual growth rate over the last five years, lower than its 6.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

Diving into the nuances of ArcBest’s earnings can give us a better understanding of its performance. As we mentioned earlier, ArcBest’s operating margin declined by 4.8 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For ArcBest, its two-year annual EPS declines of 31.7% show it’s continued to underperform. These results were bad no matter how you slice the data.

In Q4, ArcBest reported adjusted EPS of $0.36, down from $1.33 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects ArcBest’s full-year EPS of $3.69 to grow 30.2%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

ArcBest has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4%, subpar for an industrials business.

Taking a step back, we can see that ArcBest’s margin dropped by 3.8 percentage points during that time. This along with its unexciting margin put the company in a tough spot, and shareholders are likely hoping it can reverse course. If the trend continues, it could signal it’s in the middle of an investment cycle.

ArcBest’s free cash flow clocked in at $36.89 million in Q4, equivalent to a 3.8% margin. This result was good as its margin was 3.4 percentage points higher than in the same quarter last year, but we wouldn’t put too much weight on the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although ArcBest hasn’t been the highest-quality company lately because of its poor bottom-line (EPS) performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 15.6%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, ArcBest’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

ArcBest reported $124.2 million of cash and $464.6 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $285.8 million of EBITDA over the last 12 months, we view ArcBest’s 1.2× net-debt-to-EBITDA ratio as safe. We also see its $3.37 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see ArcBest narrowly top analysts’ revenue expectations this quarter. On the other hand, its EBITDA missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $85.30 immediately following the results.

Updated: January 30, 2026 at 6:22 AM EST

Before investing in or passing on ArcBest, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

We see the value of companies helping their customers, but in the case of ArcBest, we’re out. To kick things off, its revenue growth was mediocre over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its diminishing returns show management's prior bets haven't worked out. On top of that, its low gross margins indicate some combination of competitive pressures and high production costs.

ArcBest’s P/E ratio based on the next 12 months is 17.8x. While this valuation is fair, the upside isn’t great compared to the potential downside. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $90.75 on the company (compared to the current share price of $85.30).