Even Considering A Worse-Than-Consensus Downturn, ArcBest Seems Too Cheap

Given the difficulties of predicting the timing and magnitude of the cycles, trucking stocks can create some attractive trading opportunities, but at the cost of elevated risk. I think that’s a relevant consideration when looking at ArcBest (NASDAQ:ARCB) – the shares do look undervalued now, but trucking stocks (including less-than-truckload carriers like ArcBest) don’t perform well when the PMI heads below 50 and there is growing evidence of a meaningful slowdown in industry drivers.

Since my last update, these shares have risen about 15% overall (and they ran up almost 80% toward the end of 2021), outperforming other LTL carriers like Old Dominion (ODFL), Saia (SAIA), and Yellow (YELL). I am concerned that I’m underestimating the degree to which ArcBest will see volumes and profits contract in the coming downcycle, but the shares look undervalued on what I consider to be reasonable modeling assumptions. While the space is a little crowded with ideas now, I think ArcBest is worth a look.

 

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Even Considering A Worse-Than-Consensus Downturn, ArcBest Seems Too Cheap