What happened
Macro concerns got the best of truckers in March, and ArcBest (ARCB -1.29%) was among the companies that saw the air come out of its tires. Shares of ArcBest traded down 13.1% for the month, according to data provided by S&P Global Market Intelligence, as cost pressures continue to eat at transportation stocks.
So what
Trucking can be a difficult, cyclical industry, as long-time holders of ArcBest know well. The company, founded in the 1920s and formerly known as Arkansas Best, has seen its fair share of upswings and downswings over the years due to changes in demand and costs associated with labor and fuel.
Image source: Getty Images.
We already had a tight labor market heading into March, and Russia's late February invasion of Ukraine caused oil prices to spike to 13-year highs. That's a tough environment for any trucking company to operate out of, and investors fled shares of transports including ArcBest as a result.
ArcBest management in recent years has done a lot of work to bring down costs and improve profitability, and the company in 2021 posted some impressive quarterly earnings beats. It is also branching out into areas including logistics that should deliver higher margins, and in time a higher multiple for the stock. But with cost pressures squeezing the business investors were in no mood to focus on the long term outlook, leading to the stock's decline in March.
Now what
ArcBest deserves high marks for its streamlining work, and is now arguably one of the more attractive investments in trucking. Alas, the company could be driving into some difficult headwinds for the foreseeable future.
Fuel prices remain a huge question. And the industry is also dealing with an oversupply of capacity. According to industry data service Freightwaves, the number of trucks available for higher has risen from about 160,000 last summer to nearly 177,000 today.
Even after the March decline, ArcBest shares are still up more than 130% over the past three years. Investors looking for bargains would be well-served to stay on the sidelines for now and see how the next few months play out.
