QUOTE AND NEWS
Market Intelligence Center  Dec 8  Comment 
YRC Worldwide Inc (YRCW) is a good candidate for a covered call at the $22.50 level. The Apr. '15 call at that price should fetch a credit of about $4.05, which means the entire position has a net debit of about $20.79. This trade has 12.84%...
Market Intelligence Center  Nov 14  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artificial Intelligence Center are highlighting two trades on YRC Worldwide Inc (YRCW) today after it closed at $24.22 on Thursday. For more conservative...
Market Intelligence Center  Nov 5  Comment 
MarketIntelligenceCenter.com’s patented algorithms have chosen the Apr. '15 $20.00 call for a couple of hedged-trading ideas on YRC Worldwide Inc (YRCW). A traditional covered call on YRC Worldwide yields 8.99% (20.14% annualized, for comparison...
Benzinga  Oct 31  Comment 
Shares of YRC Worldwide Inc (NASDAQ: YRCW) were moving higher Friday on heavy volume. The trucking company delivered earnings after Thursday's market close, with operating revenue for the Q3 2014 of $1.323 billion, $70.0 million (or 5.6 percent)...
Benzinga  Oct 31  Comment 
GAIN Capital Holdings (NYSE: GCAP) shares jumped 23.69% to $8.72 after the company announced its plans to acquire City Index for $118 million and announced strong preliminary Q3 results. YRC Worldwide (NASDAQ: YRCW) shares gained 22.80% to...
Market Intelligence Center  Oct 31  Comment 
For a hedged play on YRC Worldwide Inc (YRCW), MarketIntelligenceCenter.com’s option-trade picking algorithms recommend the Apr. '15 $15.00 covered call for a net debit in the $13.80 area. That is also the break-even stock price for the covered...
TheStreet.com  Oct 31  Comment 
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. NEW YORK (TheStreet) -- Here's what Jim Cramer had to say about some of the stocks callers offered up during the Mad Money Lightning...
Market Intelligence Center  Oct 3  Comment 
The patented option-trade picking algorithms that power MarketIntelligenceCenter.com's Artifical Intelligence Center found a trading opportunity with YRC Worldwide Inc (YRCW) that should provide a 9.92% return in just 196 days. Sell one Apr. '15...
Motley Fool  Sep 24  Comment 
It's not living up to expectations -- yet.




 

YRC Worldwide (NASDAQ: YRCW) is primarily a trucking company, transporting industrial, commercial and retail goods. YRC charges its customers a base rate and then a variable fee based on the price of diesel fuel, allowing it to pass changes in fuel prices along to its customers.[1] While this fee structure shields the company from immediate changes in fuel prices, its customers may be willing to ship less overall as fuel prices climb. The company earned $5.2 billion in revenue but incurred a net loss of $622 million in net income in 2009.[2]

The company ships a wide variety of goods, making its revenues a barometer for the overall economy's health. YRCW is particularly exposed to the manufacturing and retail sectors, and it depends on the two biggest U.S. retailers, Wal-Mart and Home Depot, for 12% of its business.

YRCW faces particular challenges from increased federal regulation of state and national borders (due to terrorism) as well as more stringent emissions rules set forth by the Environmental Protection Agency (environmental concerns). In addition, 70% of the company's employee base is unionized, exposing the company's operations to potential work shortages/stoppages and the bargaining power of the International Brotherhood of Teamsters.

Company Overview

Business Segments[3]

YRC Worldwide divides its subsidiaries into four business groups:

  • YRC National Transportation (66% of revenue) includes Yellow Transportation and Roadway Express, provides national less-than-truckload services. In LTL shipping, a trucking company typically consolidates multiple shipping orders onto one truck, thus requiring the company to maintain sorting terminals where freight loads are consolidated with other shipments that have proximate destinations. YRC Worldwide typically charges a base shipping rate plus a variable rate that fluctuates with diesel prices. YRC National Transportation serves the United States, Canada, Mexico, and Puerto Rico. About 38% of shipments are completed within two days.
  • YRC Regional Transportation (25% of revenue) also provides LTL freight services, but the subsidiaries operate within regional segments. This business group includes the brands, New Penn Motor Express, USF Holland and USF Reddaway. About 90% of shipments are completed within two days.
  • YRC Logistics (8% of revenue) offers logistics management that involves YRC Worldwide working with customers to form a comprehensive plan and coordinate movement of goods across the globe. YRC Worldwide generates revenue by developing shipping strategies that incorporate a client’s time, cost, and reliability needs. The company will also warehouse goods and negotiate freight pricing. SOLD
  • YRC Truckload (1% of revenue) - provides spot, dedicated and single-source customized truckload services on both a regional and national level through the use of company and team-based drivers. The company operates this segment through its subsidiary Glen Moore.

Business Growth

FY 2009 (ended December 31, 2009)[2]

  • Net revenue fell 41% to $5.2 billion. The decreased operating revenue was a result of lower volumes and yield across the operating companies as well as decreased fuel surcharge revenue.
  • The company incurred a net loss of $622 million, an improvement over the net loss of $976 million in the previous year.

YRC Logistics is no longer part of YRCW.

Trends and Forces

  • Sensitivity to Economic Conditions: The trucking industry is closely tied to U.S. economic cycles and is particularly vulnerable to fluctuations in the manufacturing and retail sectors. This correlation between economic growth and trucking profits is due to basic supply and demand economics since customers typically use a bidding system, which tends to keep prices fairly competitive; when shipping volume decreases in a weakening economy with supply held constant, then prices usually decrease.
  • Government Regulations: YRC Worldwide is subject to follow regulations set forth by the US Department of Transportation and Homeland Security, along with the Environmental Protection Agency (EPA). YRC Worldwide ships most goods with a guarantee on shipping time. Any further restrictions on the industry could potentially disrupt their shipping times and negatively effect business relationships. Terrorist events could lead to more restrictions and guidelines for the transportation industry. In addition, the EPA requires a progressive decrease in diesel truck emissions through 2010 due to environmental concerns. These regulations could lead to higher fuel, trucks, and maintenance expenses.
  • Union Risks: With 70% of YRC Worldwide's employees belonging to the International Brotherhood of Teamsters, the company is exposed to a few labor risks. If conditions between the company and the union were to deteriorate, then YRC Worldwide would be more vulnerable to shortages or stoppages, which would adversely effect business operations and income. Moreover, YRC Worldwide's laborers may have more bargaining power than non-unionized competitors, thus, the company may have to pay higher labor expenses than its industry average.
  • Fuel Expenses: YRC Worldwide, along with its peers in the trucking industry, are relatively shielded from changes in fuel prices, because of a generally accepted fuel surcharge system, in which customers agree to pay established shipping rates plus or minus a change in diesel prices. However, if diesel prices continue to increase, it may be harder for the trucking industry to continue its practice of applying the expense to their customers.
  • Customer Concentration Risk: YRC worldwide’s two largest customers, Home Depot (HD) and Wal-Mart each contribute 6% of the company’s revenue. Some of YRC Worldwide's larger customers may be able to exert higher bargaining power than its smaller clients, and if one of these customers were to leave, it would have a substantial impact on the company's financial performance.
  • Ongoing Capital Expenses: The LTL business requires maintenance and leasing payments of operational facilities, in addition to truck and freight expenses. If cash flow from operations were to decrease, it may force YCR Worldwide to seek outside financing in order to pay reoccurring capital expenses. In turn, outside financing could be expensive if interest rates are high.

Competition

YRC Worldwide competes with other companies along the lines of its subsidiary divisions.

  • YRC National Transportation competes primarily with FedEx Freight and Conway Inc (CNW). The national LTL freight service has seen consolidation and liquidation, but remains competitive. This part of industry has seen the least growth, but also involves high barrier to entry. Capital expenses needed to build sorting facilities and operate trucks involve substantial capital contribution.
  • YRC Regional Transportation competes with a wide selection of transportation businesses. The larger competitors are Arkansas Best (ABFS), Old Dominion Freight Line (ODFL), and Saia (SAIA), but there are also entities that only own a few trucks and operate as a for-hire contractor. The LTL model still requires large expenses to operate facilities but less than the national scale.

Overall, the trucking industry tends to see periodic price decreases by firms, which try to capture extra business. Moreover, many customers use a bidding system, which tend to keep prices fairly competitive. For instance, Wal-Mart Stores (WMT) needs freight shipped, so asks several shipping firms to submit how much payment they are willing to accept. The lowest bid usually wins the contract.

YRC Worldwide approach to gaining market share from competitors and being more profitable is to be a one-stop shop for shipping customers. Through its subsidiaries, YRC offers a range of regional and long-haul LTL destinations. The company’s logistic division also provides customers with access to management solutions of transportation services.

References

  1. YRCW 2009 10-K "General Description of Business" pg. 4
  2. 2.0 2.1 YRCW 2009 10-K "Selected Financial Data" pg. 19
  3. YRCW 2009 10-K "Operating Units" pg. 5-7
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