YRC Worldwide Investors Are in for a Pleasant Ride -- Barron's

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A Green Light for Yellow by Tom Sullivan

Summary: Shares of freight-carrier YRC Worldwide (YRCW), formerly Yellow Roadway, now near $40, are down about 10% since November, historically the peak time for truckers as retailers build up inventory ahead of the holidays. In mid-December, YRCW stunned the market by lowering its Q4 earnings estimate to $0.95-$1.05/share, down from $1.40-$1.50, and dropping its 2006 full-year earnings outlook to $5-$5.10 a share, from $5.45-$5.55. Yet despite an uncertain outlook for the economy and the trucking industry, the stock looks cheap -- maybe even dirt cheap. Oil prices recently hit 18-month lows, cutting fuel costs. And the company is a solid cash generator: in the past 12 months it produced $884 million in cash-flow, up 11% from 2005, helping it pay down about $200 million of debt. Standard & Poor's recently noted that YRCW's operating margins are solid and that its business-risk profile is "satisfactory because it has a leading market share." The company also has "a small, but growing, China operation," which is taking advantage of that booming economy. Bottom Line: 2007 earnings could come in well above the Street's expectations, and shares could climb above $60.
Related Links: Why Oh YRC? Trucker's Guidance Cut is Yet Another Sign Consumer is Running Out of Gas, YRC Worldwide Proves the Skeptics Right, YRC Worldwide Pays for Owning Its Trucks With Lower Guidance, Trucker's Choice: Asset-Lite Business Model Makes for Less Volatility