Losses Continue; Company Plans to Sell $103mm in New Shares - Don't Buy Them
Stifel Nicolaus Transportation & Logistics Research
See attachment for details and important disclosures and certifications.
* YRC Worldwide continued to burn cash and lose market share (see Exhibit 1) in 1Q10, and while the economy and freight markets have been improving, we do not believe the magnitude of the recovery will be enough to bail out YRC.
* 1Q10 summary - YRC National tonnage losses led the LTL industry, and YRC is no longer the largest player in the LTL market (it's FedEx). YRC Regional reported better-than-expected volumes, though still below industry average. Yields rose slightly sequentially due to rising fuel surcharges through 1Q10. YRC Logistics continued to lose money.
* Customers are not returning in any significant form, if at all. Actually, since management continues to cut headcount with volumes improving seasonally, we believe there has been a negative impact on service (fewer bodies to service more freight).
* YRC announced it plans to issue new shares of stock to prevent running out of cash in 2010. Interestingly, because they would be unlikely to get any buyers in a traditional equity offering, YRC is taking advantage of its penny-stock status and high trading volume to issue new shares in at-the-market (ATM) transactions, which are likely to dilute current equity holders by ~20%.
* What else can YRC do to stop the bleeding and/or raise cash? It would not surprise us if the company tries to sell more pieces of its YRC Logistics division to raise cash (or shuts some or all of it down altogether to avoid further losses). Further real estate sales are expected. Even as YRC Regional looks to be getting closer to breakeven, we do not believe YRC will be able to sell this division due to the union contracts and pension overhang.
* We are reiterating our Sell rating on the shares, as we fail to see how YRC generates ~$600mm in incremental cash flow in 2011 to pay for all of its returning expenses and deferred obligations coming due next year. Most likely, we believe management will attempt to again kick the can down the road (i.e., ask the banks to take triple in 2012 instead of double in 2011), but how long is the road, and how heavy is the can? In our opinion, YRCW is not investable (until the reverse stock split could create another short opportunity).
See attachment for details and important disclosures and certifications.
read it all here
http://www.truckingboards.com/bb/index.php?page=page519
Stock recommendations and comments presented on Truckingboards.com are solely those of the analysts and experts quoted. They do not represent the opinions of Truckingboards.com on whether to buy, sell or hold shares of a particular stock.
Stifel Nicolaus Transportation & Logistics Research
See attachment for details and important disclosures and certifications.
* YRC Worldwide continued to burn cash and lose market share (see Exhibit 1) in 1Q10, and while the economy and freight markets have been improving, we do not believe the magnitude of the recovery will be enough to bail out YRC.
* 1Q10 summary - YRC National tonnage losses led the LTL industry, and YRC is no longer the largest player in the LTL market (it's FedEx). YRC Regional reported better-than-expected volumes, though still below industry average. Yields rose slightly sequentially due to rising fuel surcharges through 1Q10. YRC Logistics continued to lose money.
* Customers are not returning in any significant form, if at all. Actually, since management continues to cut headcount with volumes improving seasonally, we believe there has been a negative impact on service (fewer bodies to service more freight).
* YRC announced it plans to issue new shares of stock to prevent running out of cash in 2010. Interestingly, because they would be unlikely to get any buyers in a traditional equity offering, YRC is taking advantage of its penny-stock status and high trading volume to issue new shares in at-the-market (ATM) transactions, which are likely to dilute current equity holders by ~20%.
* What else can YRC do to stop the bleeding and/or raise cash? It would not surprise us if the company tries to sell more pieces of its YRC Logistics division to raise cash (or shuts some or all of it down altogether to avoid further losses). Further real estate sales are expected. Even as YRC Regional looks to be getting closer to breakeven, we do not believe YRC will be able to sell this division due to the union contracts and pension overhang.
* We are reiterating our Sell rating on the shares, as we fail to see how YRC generates ~$600mm in incremental cash flow in 2011 to pay for all of its returning expenses and deferred obligations coming due next year. Most likely, we believe management will attempt to again kick the can down the road (i.e., ask the banks to take triple in 2012 instead of double in 2011), but how long is the road, and how heavy is the can? In our opinion, YRCW is not investable (until the reverse stock split could create another short opportunity).
See attachment for details and important disclosures and certifications.
read it all here
http://www.truckingboards.com/bb/index.php?page=page519
Stock recommendations and comments presented on Truckingboards.com are solely those of the analysts and experts quoted. They do not represent the opinions of Truckingboards.com on whether to buy, sell or hold shares of a particular stock.
