YRC Worldwide Earnings Demonstrate Weakness of Asset-Based Trucking

Large Cap Watch List member YRC Worldwide Inc. (YRCW) announced reported diluted earnings per share (”EPS”) for the second quarter 2007 of $0.95 compared to $1.58 in the second quarter last year. Adjusted diluted EPS was $0.91, compared to $1.62 for the second quarter 2006.

Although the results looked awful, the signs of a poor environment for transportation had been building. The shares actually rallied in after-hours trading, suggesting that investors may have feared worse or even think that the bottom has been reached. I doubt that latter point, but of course I’ve been wrong before.

YRC management, however, seems to agree with me on this one. They offered guidance for a litany of line items ranging from interest expense to tax rate to shares outstanding. As far as revenue and earnings, however, your guess is apparently as good as theirs. At least whatever number you come up with, you’ll have a decent idea how much interest to expense, how much tax to reduce it by and how many shares to divide it by to arrive at EPS.

The company managed to increase its cash flow from operating activities slightly, but also managed to spend more than it generated buying new trucks. Which is one more reason to prefer Landstar (LSTR) and CH Robinson (CHRW).

YRCW 1-yr chart: