Wells Fargo sets $140 stock price target on ArcBest, cites deep value

On Friday, Wells Fargo initiated coverage on ArcBest Corp (NASDAQ: NASDAQ:), assigning the stock an Overweight rating and setting a price target of $140.00. The firm highlighted the stock’s current trading at approximately nine times the projected 2025 earnings per share (EPS), which is significantly below the average of 25 times for the less-than-truckload (LTL) sector.

ArcBest’s valuation presents an investment opportunity, according to Wells Fargo, particularly after the stock experienced a notable decline of around 30% this spring. This drop contrasts with a 5% gain in the S&P 500 during the same period. The firm believes that while ArcBest may continue to trade at a discount relative to its historical average, the current 40% discount to the next twelve months (NTM) earnings is excessive.

Wells Fargo’s assessment suggests that the market has undervalued ArcBest, especially when considering the company’s earnings growth prospects through 2026, which are expected to outpace those of its peers. The firm sees the current discount as an attractive entry point for investors.

The report underscores that ArcBest’s stock has widened its discount to nearly double the average of the past five years, where it typically traded at a 20% discount. Wells Fargo’s position indicates a strong confidence in ArcBest’s future performance relative to the overall sector.

In summary, Wells Fargo’s initiation of coverage on ArcBest with an Overweight rating and a $140 price target reflects a positive outlook on the company’s financial prospects and its potential to outperform within the LTL industry.

In other recent news, ArcBest, a logistics company, reported a strong first quarter for 2024 with $1 billion in revenue and $43 million in non-GAAP operating income. The firm experienced growth in daily shipments and tonnage in its core asset-based business, demonstrating an increase in demand for its services.

However, financial services firms Stifel and UBS have adjusted their outlooks on ArcBest, citing industry challenges and declining shipment trends. Stifel lowered its price target for ArcBest to $150 but maintained a ‘buy’ rating, while UBS cut its target to $126 and retained a ‘neutral’ rating. These adjustments come in the wake of ArcBest’s Q1 earnings, which were impacted by stagnant freight fundamentals and a shift of heavier weight volume to truckload carriers.

Despite these challenges, both firms acknowledged ArcBest’s potential for long-term growth.

InvestingPro Insights

Complementing the analysis by Wells Fargo, InvestingPro data provides a deeper dive into ArcBest Corp’s financial health and market potential. The company’s market capitalization stands at $2.38 billion, with a P/E ratio of 19.87, indicating a valuation that may appeal to value-conscious investors. Adjusted for the last twelve months as of Q1 2024, the P/E ratio is even more attractive at 18.63.

InvestingPro Tips highlight that ArcBest’s management has been actively repurchasing shares, signaling confidence in the company’s value. Additionally, the company has maintained dividend payments for 22 consecutive years, which may interest income-focused investors. It’s worth noting that while some analysts have revised their earnings estimates downwards for the upcoming period, the company is still expected to be profitable this year and has been profitable over the last twelve months.

For investors intrigued by these insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/ARCB. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further valuable analysis to inform investment decisions.

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