YRC’s fourth quarter EPS less bad than forecast; rest of picture looks dark

Less-than-truckload (LTL) carrier YRC Worldwide, Inc. (NASDAQ:YRCW) ended a forgettable 2019 by posting a net loss in the fourth quarter, but at least the deficit was less than what had been forecast.

YRC lost 46 cents a share in the fourth quarter, which was less than the 55 cents a share loss forecast by analysts polled by analysts on Barchart. The net loss for the year came in at $104 million, or $3.13 a share. YRC posted net income in its 2018 fourth quarter and for all of the year.

The results weren’t good. Operating income in the quarter dropped to $9.8 million from $55.1 million in 2018 quarter. The 2019 quarterly results included a $10.1 million net gain on property sales, while the 2018 quarter included a $28.1 million net gain for the same purpose, YRC said. Operating revenue fell to $1.16 billion from $1.25 billion. Full-year operating income plummeted to $16.2 million from $143 million, with the latter figure including a $20.8 million net gain in property sales.

Full-year revenue dropped to $4.87 billion from $5.02 billion, YRC said.

Given the weak financials, there wasn’t much to write home about on the operational front in the quarter. For the national unit, YRC Freight, fourth-quarter revenue, income, daily LTL tonnage and shipments all declined year-over-year. Operating ratio, which measures the ratio of revenues over expenses, rose to 98.8% from 94.9, an unfavorable direction.

YRC’s three-carrier regional unit didn’t fare much better in the quarter. Revenue dropped 5.9%, while operating income, LTL tonnage and shipments fell. Operating ratio jumped to 99.1% from 96%, also unfavorable.

The only reasonably bright spots for both units was the low single-digit gains in revenue per every 100 pounds carried, a long-held measure of an LTL’s carrier’s yield on the shipments it hauls. 

YRC executives blamed much of the weakness on general lethargy in the U.S. industrial economy, which has a direct impact on LTL traffic. Executives said they saw a slight improvement in macro conditions last month, but added it will take substantial and sustainable gains to give them confidence that the tide had turned.

Based on today’s closing share price of $2.55, the company’s market capitalization is sitting at $81 million. Executives rejected any recapitalization moves, unwilling to issue more equity will the share price at such low levels.

The company generated $210.8 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in 2019, a steep decline from the $307.8 million EBITDA figure in 2018. EBITDA fell $30.2 million in the fourth quarter to $47.3 million in the 2018 quarter. YRC remained in compliance with its lenders’ covenants requiring it to maintain at least $200 million of adjusted EBITDA over the prior 12 months.