Still Neutral on YRC Worldwide - Analyst Blog
October 04 2011 - 11:37AM
Zacks
YRC Worldwide Inc. (YRCW) is currently in a
mess as the company already received a delisting notice from NASDAQ
due to its extremely low valuation. Although YRC Worldwide’s
second-quarter 2011 financial results beat the Zacks Consensus
Estimates, its net loss actually increased by more than 300% year
over year.
During the last three years, the company has been reeling under
the threat of bankruptcy resulting from a significant fall in its
freight volume coupled with its highly leveraged balance sheet.
Consequently, the stock price plummeted by a massive 99% last
year.
The company’s viability depends on its ability to become
profitable but unfortunately we do not expect it to reach that
stage any time soon. In January 2011, YRC Worldwide closed 40
terminals due to low freight volume. This closure will affect 12%
of the company’s total 334 facilities.
The company is facing major challenges including sustaining
liquidity, dilution of preferred stock, loss of customers and a
competitive LTL (less than truckload) market. Trucking industry
remains highly competitive. YRC Worldwide is gradually losing
market share to its competitors such as Arkansas Best
Corp. (ABFS), Con-way Inc. (CNW), and
Knight Transportation Inc. (KNX).
The company is trying to deter the imminent financial collapse
in every possible way. Despite prudent moves to manage liquidity,
we believe YRC Worldwide must stop cash consumption for operations.
In our view, the company’s near-term bankruptcy risks still
persist.
Of late, management has taken some measures such as an
aggressive pricing strategy and emission control to streamline its
operations. We reaffirm our long-term Neutral recommendation on YRC
Worldwide.
ARKANSAS BEST (ABFS): Free Stock Analysis Report
CON-WAY INC (CNW): Free Stock Analysis Report
KNIGHT TRANSN (KNX): Free Stock Analysis Report
YRC WORLDWD INC (YRCW): Free Stock Analysis Report
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