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Arkansas Best shares fall after analyst downgrade

NEW YORK (AP) -- Shares of Arkansas Best Corp. fell Thursday after a Sterne Agee analyst cut his rating on the trucking company, predicting that its shares won't rise anytime soon.

THE SPARK: Analyst Jeffrey Kauffman dropped Arkansas Best to "Underperform" from "Neutral," saying that in light of the company's release of a lower-than-expected third-quarter profit last week and growing worries about the "fiscal cliff," it could be tough for the stock to post meaningful gains.

THE BIG PICTURE: The Fort Smith, Ark.-based company said third-quarter net income fell 47 percent to $6.5 million, or 24 cents per share. Revenue rose 13 percent to $577.5 million.

Analysts, on average, expected a profit of 26 cents per share on $565 million in revenue, according to FactSet.

The company said that the weak economy resulted in lower demand from its customers and reduced its profitability.

At the same time, many investors are worried that the so-called "fiscal cliff," a combination of automatic tax increases and deep spending cuts set to go into effect next year, could send the country into a recession, if Congress doesn't prevent it with a budget compromise.

THE ANALYSIS: "In the absence of volume growth and improved yields, it is all about reducing expenses, which the company is unable to do without meaningful participation by its union employees," Kauffman wrote in a note to investors.

The analyst added that he doubts that union workers will make the kind of labor concessions the company needs. Negotiations with union labor are set to start next month, with the current contract ending in March.

THE SHARES: Arkansas Best shares fell 59 cents, or 7.3 percent, to $7.54 in afternoon trading, after dropping as low as $7.46 earlier in the session. Over the past 52 weeks, the stock has traded between $7.32 and $22.79.