Yellow’s shares soar as LTL carrier posts strong quarter

Shares of Yellow Corp. soared more than 26% in after-hours trading Wednesday as the less than truckload carrier posted earnings per share that more than tripled consensus estimates and reported its highest quarterly operating income since 2007.

Earnings per share came in at $1.17, compared to a net loss of 18 cents per share in the second quarter of 2021. Analysts EPS estimates were at 35 cents per share. Net income of $60 million was a drastic improvement from the $9.4 million net loss figure in Q2 of 2021.

The company’s operating ratio, the measure of revenues to expenses, improved by nearly 500 basis points to 93%, Yellow (NASDAQ: YELL) said. Operating revenue rose to $1.42 billion from $1.31 billion, and operating income of $99.2 million more than tripled year-earlier results. The 2022 operating income included a $3.2 million net gain from property disposals, according to Yellow.

Revenue per every 100 hundred pounds shipped — or hundredweight — rose 29.7% on a year-over-year (y/y) basis. Nearly half of that gain came from higher fuel surcharges as diesel prices spiked sharply in the quarter. Revenue per shipment rose 27.8% y.y, with about half of the gain coming from higher fuel surcharge revenue. 

Higher yields and cost reductions drove much of the operating income gains, Yellow CEO Darren Hawkins said. Average daily tonnage in the quarter declined 16.4% y/y, the company said. Daily tonnage in July fell 17% y/y.

On average, rates on contract renewals increased by 6% to 7% in the quarter, a slower pace of y/y increase than the first quarter. The LTL pricing environment remains favorable, Yellow executives said.

Yellow is in the process of consolidating its four operating company networks into one network with national and regional coverage. The first phase of the project, known as One Yellow, will be completed later this summer with the integration of the Reddaway western network. The entire revamp is set to be completed by the end of 2022.

Yellow lowered its CapEx guidance to a range of $250 million to $300 million. That is down from an earlier range of $325 million to $400 million. The CapEx reduction was due to a limited availability of tractors and trailers, Yellow said. The company also reduced its cost of purchased transportation to 14.5% of revenue to 16% of revenue.