Trucker Warning (YRCW) More Ominous Developments

Douglas A. McIntyre

The good old Yellow Roadway, now YRC Worldwide Inc. (YRCW), just guided earnings lower.  This isn’t a garden variety warning based on higher gas costs per mile affecting the trucker.  This is the Economic Slowdown sort of warning, yet one more indication of an economic soft landing.  When you start seeing the basic materials companies AND the companies responsible for shipping and transportation warning, then you have to think about what other related groups are going to warn and what is or is not priced in.

Here is the quote: “As widely reported by industry analysts, the economy has slowed significantly in the fourth quarter, resulting in lower volumes than we anticipated across all of our asset-based business units,” stated Bill Zollars, Chairman, President and CEO of YRC Worldwide. “As a result of this economic slowdown, we are adjusting our earnings guidance.”

YRCW put Q4 2006 EPS in the range of $0.95 to $1.05 and full year 2006 earnings to be $5.00 to $5.10 per share. The company’s previous guidance was $1.40 to $1.50 per share for the fourth quarter and $5.45 to $5.55 per share for the year.

Shares of competitors are lower in after-hours activity: JBHT down 1.9% at $20.90; SWFT down 0.7% at $28.10; LSTR -0.6% to $39.10; and HTLD -1.8% at $15.00.  Most of these stocks were all up on the day.  There hasn’t been much activity in the bigger air freight companies like Fedex (FDX) or UPS (UPS).  This entire transport group had an implied floor because of Private Equity & Management LBO’s in the group, but that may take a backseat as the deals have’t been closed because offers were too low.  YRCW has a 52-week trading range of $35.27 to $51.54.

Jon C. Ogg
December 14, 2006