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

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.