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YRC Wordwide’s 2Q17 Earnings Missed the Estimate

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Part 7
YRC Wordwide’s 2Q17 Earnings Missed the Estimate PART 7 OF 7

YRC Worldwide: Analyst’s Opinions after 2Q17 Earnings

Analysts on YRC Worldwide

According to consensus estimates compiled by Thomson Reuters, YRC Worldwide (YRCW) has a consensus rating of 2.17 with a “buy” recommendation. Analysts’ opinions on the company haven’t changed since its 2Q17 earnings.

Of the six analysts surveyed by Thomson Reuters, two have a “strong buy” or equivalent recommendation for YRCW stock. One has recommended a “buy,” and the remaining three have suggested a “hold.” None of the analysts surveyed by Reuters has a “sell” rating for the stock.

YRC Worldwide: Analyst’s Opinions after 2Q17 Earnings

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YRCW and peers’ target prices

YRC Worldwide has a mean one-year target price of $17 per share. The closing price was $12.70 on August 4, 2017. Based on that, the stock has a return potential of 33.8% over the next 12 months. Let’s look now at YRCW’s peers’ target prices and return potentials.

  • Old Dominion Freight Lines (ODFL): $99.75 with a return potential of 3.7%
  • United Parcel Service (UPS): $114.30 with a return potential of 1.9%
  • FedEx (FDX): $230 with a return potential of 9.9%
  • XPO Logistics (XPO): $70.90 with a return potential of 23.0%

Investors who are interested in the transportation space can consider the SPDR S&P Transportation ETF (XTN). XTN holds 26.0% in major trucking companies and 13.0% in major US railroads.

Why analysts are divided on YRCW

YRC Worldwide has had mixed signals so far in 2017. The stock’s top line has seen some revival. Higher volumes and a stable pricing scenario drove its revenues. With the rise in fuel expenses, the fuel surcharge revenue should rise in the coming quarters.

However, costs remain a concern for the company. Analysts haven’t seen any strong productivity gains for YRCW in 2017. The company stated in its 2Q17 conference call that it’s aiming for a cost reduction of $25.0 million in 2017. YRCW has been working on the full implementation of its route optimization solution, Quintiq, through the end of 2018. Currently, this technology has been installed on 50 of the 260 terminals.

On the debt front, YRCW entered into a new debt agreement, which should raise interest expenses in the coming quarters. On the positive side, Moody’s recently upgraded YRC Worldwide’s rating from “stable” to “positive.”

Some investors think YRCW should work on cost curtailment. Although the present LTL (less-than-truckload) environment is positive, its sustainability may not last.

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