YRC Worldwide: Things have to get better

Transportation company YRC Worldwide Inc. (NASDAQ: YRCW) issued 1Q earnings news...and about the only good news was that there were any earnings at all. The numbers, however, do not tell the full story. Like all other trucking transportation companies, YRC Worldview was beset by slack demand, horrible winter weather and rising fuel costs.

In YRC's case, most of the decline in earnings was due to acquisition and reorganization charges to complete the purchase of USF Reddaway and USF Bestway. Operating revenue was $2.3 billion, not much changed from 1Q 2006 operating revenue of $2.4 billion. But operating income of $20 million for 1Q 2007 was a drop of $68 million from 1Q 2006. Diluted EPS for 1Q 2007 was $.02 compared with 1Q 2006 diluted EPS of $.71. Ouch!

The 1Q 2007 EPS figure includes $.17 per share impact due to severe winter weather, but excludes $.18 reorganization charges. It will take several more quarters for YRC Worldwide to right itself.

Given the numbers for 1Q, YRC Worldwide has revised its FY guidance. It now forecasts adjusted, diluted EPS of $4.00-$4.20 with consolidated revenue of over $10 billion. Interest expense is a best guess estimate at $90 million, with capital expenditures running $375-$400 million. The company will continue to focus on cost reduction strategies. Not surprisingly, the stock was down $.69 on the earnings news, closing recently at $38.74.