YRC Worldwide Continues To Impress

| About: YRC Worldwide, (YRCW)

Trucking company YRC Worldwide (NASDAQ:YRCW) reported its September quarter results today, outperforming on most metrics as illustrated below:

  • Revenues increased 12.3% year-over-year to $12.8 billion, and now stand at the highest level in the last two-and-a-half years. Revenues at its two major segments, National Transportation and Regional Transportation, that together account for 97.6% of their total revenues, were up 11.5% and 14.3%, respectively, year-over-year. Furthermore, they reported improvements across the board into components that feed into revenue such as tons per day, shipments per day, revenue per hundredweight and revenue per shipment, all up year-over-year.
  • Operating income before unusual items improved to $3 million versus an operating loss of $12 million in the year-ago September quarter. The reported numbers for both quarters included unusual items, with the current quarter including $12 million of restructuring professional fees and a $15 million non-cash charge for union employee equity awards, and the year-ago quarter $7 million of restructuring professional fees.
  • Net loss improved to $41 million, before a $79 million charge related to fair value adjustments related to debt obligation, versus $62 million in the year-ago quarter.
  • Working capital also improved, with days-sales-outstanding at 38.5 days, one day better than the year-ago quarter. Further, they have an additional $400 million available from the new ABL facility.

We have covered YRCW extensively recently, first in our weekly coverage on July 25 when we indicated our bearish stance with the stock then trading at $1, based on the impending dilution from the re-structuring. Then, with the stock down to the 5c range and the impending restructuring over and the bankruptcy avoided, at least for now, we turned bullish in our assessment of the company on September 29, and then again on October 6 based on a comparison to its peers.

The improvement in operating fundamentals in the just-completed September quarter further bolsters the case for bulls. With the threat of bankruptcy out of the way, at least for now, and the impending reverse split of the stock before the end of the year, the stock has limited downside from here. As we discussed in our prior articles, YRCW stock is trading as if bankruptcy is imminent, and this is simply not supported by either the improvement in operating fundamentals or improved liquidity post-restructuring. Bears have contended that YRCW has been bleeding market share to competitors. While the company did not release any information on market share, it seems a difficult argument given the 12.3% improvement in operating revenues year-over-year when many of its peers in the industry such as Con-Way Inc. (NYSE:CNW) and Swift Transportation (NYSE:SWFT), as well as industry leaders United Parcel Service (NYSE:UPS) and FedEx Corp. (NYSE:FDX), have been reporting revenue growth year-over-year in the 8%-14% range.

We continue to believe that now is a good time to start building a small speculative position in the stock. But as advised in our prior articles, we would start small and build in stages. YRCW shares are still trading weak, and they are likely to weaken when the company announces the inevitable 1-for-100 (or something like that) reverse split sometime before the end of the year, so we would save some fire-power to take advantage of when that weakness happens.

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix by Edgar Online, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.