Deutsche Bank analyst Amit Mehrotra maintained a Buy rating on ArcBest (ARCB – Research Report) yesterday and set a price target of $148.00.
Amit Mehrotra has given his Buy rating due to a combination of factors that suggest ArcBest is positioned to outperform in the near future. The less than truckload (LTL) industry, where ArcBest operates, is perceived as highly attractive for investment, given its consolidated nature and the resulting pricing power. The industry has historically shown resilience, with positive pricing dynamics observed 85% of the time over the past two decades. Mehrotra highlights that with only seven public LTL companies accounting for over half of the industry revenue, there is considerable scope for ArcBest to leverage this market structure to its advantage.
Furthermore, Mehrotra’s optimism is rooted in the potential for significant earnings growth for ArcBest from 2023 to 2025, driven by improvements in yield/pricing and a recovery in LTL fundamentals. He notes the company’s efficiency initiatives and technological advancements in operations as key drivers for margin gains. The report anticipates a reduction in labor inflation and recognizes improvements in the company’s operating ratio, which is expected to align more closely with pricing strategy during a freight recovery phase. This potential for pronounced growth in yield and the company’s strategic positioning justifies the target price of $148, reflecting a 25% upside potential, based on an earnings estimate that approaches the peak of ArcBest’s historical range.
According to TipRanks, Mehrotra is a 4-star analyst with an average return of 6.8% and a 53.89% success rate. Mehrotra covers the Industrials sector, focusing on stocks such as Canadian National Railway, Canadian Pacific, and FedEx.
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ArcBest (ARCB) Company Description:
ArcBest Corp. is a holding company which engages in the provision of freight transportation services and solutions. It operates through the following business segments: Asset-Based, ArcBest, and FleetNet. The Asset-Based segment includes national, inter-regional, and regional transportation of general commodities through standard, expedited, and guaranteed less-than-truckload services. The ArcBest segment refers to the operations of the company’s expedite, truckload, and truckload-dedicated businesses as well as its premium logistics services; international freight transportation with air, ocean, and ground service offerings. The FleetNet segment covers the operations of FleetNet America, Inc., and certain other subsidiaries that provide roadside assistance and maintenance management services for commercial vehicles through a network of third-party service providers. The company was founded in 1966 and is headquartered in Fort Smith, AR.
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