References
Bluemule Wrote:
"And bubbadog...Please try to not hink there is or will be a loss of 5-15% customer loss. Again, I don't know where you guys are getting these ideas from."
They come from the same people as you mentioned before that wanted the merger to be done five years ago.
Below are the quotes with references.
These were written
before the Stock Market Crash.
An analysis of the pending integration of Yellow and Roadway
September 24, 2008 by Stifel Nicolaus Transportation and Logistice Research.
Potential problems we see with the plan:
Timing
As reasoning for doing this integration now, after years of touting the benefit of two separate brands and separate
networks, the company is citing the weak economy that has “created enough capacity in the networks to integrate
without interrupting customers’ supply chains.” We do not see losing tonnage and market share as positives. A
better time to integrate networks, in our view, is when times are good (balance sheet and margins are strong) and
there is solid density in the network. This way, unprofitable freight can be shed as the network is downsized to
have a leaner network full of higher-quality freight. With a still-soft economy and excess capacity in the LTL industry,
shippers have options and can shift fairly easily to a competitor of Yellow and Roadway that has a stronger
balance sheet and no integration issues.
You may view the full report here:Originally posted by KK
http://www.shnv.net/YRCW_What_Lies_Ahead.pdf
Research Bulletin Stephens Investment Report September 26th.
Downgrading Until High Risk, High Reward
Strategy Shows Signs of a Payoff
INVESTMENT CONCLUSION:
We are downgrading the stock of YRC Worldwide to Equal-Weight
from Overweight and are lowering our price target to $12 from $28.
YRCW is embarking upon a fascinating strategy that near term is
high risk, but offers the potential to substantially lower its fixed costs if
its merger of Yellow and Roadway ("National") is successful.
However, that payoff is likely a year away, meaning that the
integration risk needs to be more heavily weighted than the reward,
especially in a deteriorating freight market.
KEY POINTS:
• The primary risk to YRCW from shrinking the number of National
terminals/service centers from 586 (as of 12-31-07) to
approximately 350 is service disruptions. If significant enough, then
YRCW could experience noticeable revenue losses and customer
defections, perhaps on the order of 15% to 20%.
• If YRCW does nothing though, its prospects would also be dim with
National revenues likely to decline 7% to 10% the next year simply
due to the weak economy, secular decay in long-haul deliveries and
substitution pressure from intermodal.
• To be fair, it's not certain YRCW will lose 15% to 20% of its
revenues, but history suggests it will be challenging.
• The service and potential revenue loss risk is heightened by the
weak overall environment. With every carrier operating well below
capacity, we believe that many competitors will be eager to capture
revenue from any shippers nervous about the integration process.
You may view the full report here:
http://www.tdu.org/files/YRCW Sept 08 EW.pdf
