Why Shares of YRC Worldwide Are Down Today


What happened

Shares of YRC Worldwide (NASDAQ:YELL) fell more than 15% on Friday after the trucking company reported disappointing quarterly results. It’s been a good environment for transportation companies, but YRC continues to sputter.

So what

After markets closed Thursday, YRC reported a fourth-quarter loss of 37 cents per share on revenue of $1.165 billion, missing analyst estimates for earnings by 13 cents per share on revenue that was slightly higher than expected.

There was a lot of noise in the numbers. Operating net income for the year came in at $56.5 million, but included a $45.3 million net gain on property disposals.

A truck and trailer on the highway.

Image source: Getty Images.

Shares are down more than 50% since the beginning of 2018, caught up in the company’s effort to refine its business around regional less-than-truckload (LTL) services. LTL involves packing small shipments from multiple customers onto a single truck, and tends to be more lucrative than full-truck shipping but also more complex and cost-intensive.

The struggles have lasted more than a decade. In 2009, YRC barely avoided bankruptcy when it persuaded its bondholders to swap about $470 million in notes for equity.

YRC also said it is changing its name to Yellow Corporation, adopting one of the legacy brands from its past. In 2003, the former Yellow Corporation acquired Roadway in a $1 billion deal, forming Yellow Roadway. That company went on to roll up other brands, taking the YRC name.

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“As we continue our transformation into a super-regional, LTL freight carrier, it is the right time to reintroduce the Yellow Corporation name and modernize the holding company brand,” CEO Darren Hawkins said in a statement. “Migrating to one Yellow technology platform and creating one Yellow network are the key enablers of our enterprise transformation strategy, which is to provide a superior customer experience under one Yellow brand.”

The new Yellow will also trade under the YELL ticker, effective Feb. 8.

Now what

Hawkins said that YRC saw volume and pricing improve in the fourth quarter, and given the tight capacity and high demand for transport services, there is reason to believe pricing will be stable, if not stronger, heading into 2021.

The new Yellow has $440 million in liquidity, and integrating all of its parts under one tech platform should help streamline operations. This company appears to be on the right road, but for my money there are better transportation investment opportunities out there than waiting on a Yellow turnaround.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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View more information: https://www.fool.com/investing/2021/02/05/why-shares-of-yrc-worldwide-are-down-today/

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