Avoid This Trucking Stock

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Company YRC Worldwide (Nasdaq: YRCW  )
Submitted by TSIF
Member Rating 99.92
Submitted on 6/28/2011
Stock Price At Underperform Recommendation $1.51

YRC Worldwide Profile

Star Rating (out of 5) *
Headquarters Overland Park, Kan.
Industry Trucking
Market Cap $54.5 million
Industry Peers

Arkansas Best (Nasdaq: ABFS  )

Con-Way (NYSE: CNW  )

JB Hunt Transport Services (Nasdaq: JBHT  )

Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.

This Week's Pitch:
[YRC Worldwide] was a 2.5 Bagger in four days, rising from $0.60 to $1.60 yesterday, before retreating back to $1.14 today. [YRC Worldwide] actually has a lot of assets and after renegotiating with the Unions I actually thought they may have had a chance. $4.3 billion in sales and a $75 million market cap is fairly tempting and I can see where it bears some investigation. The bottomline, however is that [YRC Worldwide] continued to signal that it is unlikely to dig its way out.

Part of the agreement with unions and bondholders ended up being dilution to the point that stockholders had only a few percent, at best, of any equity left. Losses continue to mount and [YRC Worldwide] has a net negative stockholder equity of $285 million. With bankruptcy still possible and a negative book value and only 2.5% of the shares left in stockholders hands, a 2.5X 4 day rise in share price should not have occurred.

Some equities facing bankruptcy get new financing as investors/banks, etc, don't want to own the company by foreclosing and they balance their risk reward between letting a company run or taking what is left. Regardless to how it plays out, the shareholders have nothing left. A few [companies] with decent assets have survived and help fuel the speculators, (GGP, Pilgrim's Pride, etc). Finding company's where the assets can be realigned and [there] is sufficient equity for the stockholders is rare and neither of these two plays appears to have the attributes, although [YRC Worldwide] might have a year ago if someone didn't dig all the way into the books.

Speculation is one reason that we don't have an efficient market, and it is only getting worse. Evergreen Solar, Inc and [YRC Worldwide] are wrestling to stay out of bankruptcy yet their stock prices dramatically change the market cap in a few short trading hours.

If you decide to participate in these moves then don't be surprised if you're the one left without a chair and sorely limited ass-ets.

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The Motley Fool is investors writing for investors. Dan Dzombak did not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (12) | Recommend This Article (12)

Comments from our Foolish Readers

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  • Report this Comment On June 29, 2011, at 9:24 PM, tooriskyforme wrote:

    Ladies & Gentlemen,

    The truth about YRCW is perfectly depicted in this geat YouTube video where Bill

    Zollars, YRCW CEO explains his new financial plan in detail.

  • Report this Comment On June 29, 2011, at 11:17 PM, reachmygoals1 wrote:

    I'm taking the contrarian view, freight is recovering strong in second half of the year. YRCW will survive and make profit in 2nd quarter. I do expect a cash infusion but it may not have to dilute the shareholders. Remember a hedgefund injected millions of dollars a few days ago, I feel smart money knows what will happen and will gain tremendously. Its easy to say the case of a company struggling to go under, however a few have survived such as SIRI.

  • Report this Comment On June 30, 2011, at 12:17 AM, Mustang6147 wrote:

    I think Motley is all washed up on this one. Yrc is bringing back their Teamster workforce, and Holland has adds in every market for employees. New Truck orders have been placed, and they are rolling in to service centers daily.....Customers are sick of hearing the scab carriers cry doom and gloom..... Folks..... Motley is the fool here,

  • Report this Comment On June 30, 2011, at 11:44 AM, Rat1126 wrote:

    First off, it is a longshot that YRC will do more than break even. Secondly, they have cut their great workforce so far down, their service is worse than any other LTL carrier out there. Thirdly, how long are they not going to pay in to the pension fund and have their workforce with a cut in pay? They can't do this forever and if they didn't have the fair advantage that ABF doesn't, they would have gone belly up a year ago. What is going to happen to these teamsters and orphans when their pension fund is only funded to 60%? YRC is a shell of their former self and cannot compete with UPS Freight, Fed Ex, Old Dominion or even ABF.

  • Report this Comment On June 30, 2011, at 11:53 AM, TSIF wrote:

    Freight and Transportation stocks do have some promise. Invest in a shareholder Friendly company or a transportation index.

    LESS than 2.5% of the company is left with shareholders after all the refinancing and settlements with the Union. This still didn't put YRCW on the path to recovery. At best they survive and after a few reverse splits are worth a fraction of what speculators ran them up to this week.

    At worse, they will do a formal bankruptcy leaving out the remaining 2.5% shareholder value.

    As far as MF being washed up on this one...MF is made up of about 70,000 people who signed up to "Play a game" around beating the S&P. The focus is INVESTING....not.... SPECULATING. Most of the articles are quoting investment amateurs. I'm certainly one.

    Overall, however, most amateurs know the difference between speculating and investing.

    Unfortunately, there are a large percent of speculators and those with blinders on. Even a blind squirrel finds a nut from time to time, but overall it’s a bad investing philosophy.

  • Report this Comment On June 30, 2011, at 11:57 AM, TSIF wrote:

    Man Dan! That TSIF kid can write....I don't know much about his/her stock picking ability...but good find. Maybe MF should hire him!

  • Report this Comment On June 30, 2011, at 12:51 PM, Mustang6147 wrote:

    Rat1126 needs to compare apples to apples not scabs to teamster.... Every reason this obvious scab carrier driver gave for YRC not moving forward or becoming profitable is exactly why they will. Reduced pension obligations, reduced workforce, reduced hourly rate, all equals lower operating expenses, and more money left over for their debt pay down. See there is one thing everyone is forgetting. Conway hacked their penssions into 401 k's and all was silent. Old Dominion doesnt pay O/T so YRC still has a better benefits package then all he listed. WHo wants a pension heald by the company??? so they can do with the money what ever they want and when you want to retire, theres no money. To compare an at will employer to a Union employer, is honestly a sign of ignorance. If YRC goes out, I will not work at Any companies rat listed.

    There is nothing good happening in the LTL industry right now, or in Trucking general. Turnover rate is at its all time high for OTR drivers, and mexican or russian drivers are workin for free living with their families inside the cab of a tractor trailer. How can anyone compete, and who would hire that? Well I 'll tell ya who, THE SCABS.

  • Report this Comment On June 30, 2011, at 11:55 PM, reachmygoals1 wrote:

    CEO is retiring, new CEO will be announced. Teamsters is backing up YRCW and will not let it fail. The government has assisted almost all industries, now its blue collar America.

  • Report this Comment On July 04, 2011, at 7:31 PM, Bladerunner2000 wrote:

    The only thing the article is saying is 2.5% for shareholder while teamsters, banks and company hold the rest. IF YRC survives, they will be no where near as strong as they used to be. Here are some figures: YRC owes near 2 billion in debt and constantly have to pull money for operating costs off thier revolving credit or run to the banks to loan them more money- which means additional debt. They are constantly renegotiating the terms of contracts with the banks, Teamsters and thier workers every few months or so with the threat of "Do this or we'll file bankruptcy."

    They will owe 3 to 4 billion in back pension payments in 2015. They were supposed to put 100% pension funding starting in June but alas no funds- they claimed that they could only afford 25% and then only in a 401k because the pension fund companys said "No way its 100% or nothing". They pay out millions per month in pension and workers comp claims-one figure here was said to be close to 1 billion a month.

    The equipment is outdated. Trailers age average range from 10 to 25 years with city tractor units averaging the same. Line haul equipment is behind by about 5 years. The money payed out in freight claims is another hinderance. Damage claims are said to be up in the millions.

    As far as them making money for the second quarter- they better be showing a profit. This time of year is high time for all trucking companys but YRC has consistantly shown poor performance for the past several years.

    You don't have to take my word for it folks. Do your own research. The info is out there. YRC is a loser outfit. I would'nt trust them to ship a napkin across the street. As I've stated before they might survive but why chance it? There are better stock options out there.

  • Report this Comment On July 04, 2011, at 7:34 PM, Bladerunner2000 wrote:

    In paragragh 2 it states: "They pay out millions per month in pension and workers comp claims-one figure here was"

    I meant to write medical instead of pension

  • Report this Comment On July 21, 2011, at 11:00 AM, freightvet wrote:

    Its too bad 'Mustang' has his hopes and dreams hitched to a team that has 2 broken legs and no teeth. Scabs in that case, would indicate healing, and YRC is nothing but open sores on the backside of that aforementioned team.

    This company is still in business for one reason folks. We have a Deomcrat in office that took almost 800 billion of our taxpayer dollars to bail out his friends and use as a leverage tool against the banks and lenders that hold this YRC debt. No trucking company in history has overcome the debt this one has. They gambled in 2005 and combined almost all of the remaining teamster carriers. They did that because the teamsters cant compete with the non-union carriers ANY longer. Unions had their place in history, but they are outdated. The federal government provides the protections now for the average worker. And the non-union companies that are great places to work, are the ones that take care of their people, and they flourish.

    Its hard to believe that the lenders that were promised a stake in this company 18 months ago, when YRC was on the absolute brink of default, are now looking at their investment being worth PENNIES of what they put in.

    I am a 26 year veteran in management in this industry. I have seen and worked for good companies and bad, union and non-union. I would change professions before working for YRC, even at twice my current income. And as a commentor above eloquently opined.... I wouldnt hire this company to haul a napkin across the street. The union sunk this once large, proud company, and at some point, they gave up their business to that corrupt institution. Its a shame for the thousands of good people that do work there.

    Its doomed for sure. I certainly wouldnt put my company's products in their pipeline and have it lost or missing when the inevitable happes.

  • Report this Comment On July 28, 2012, at 4:06 PM, wayno1000 wrote:

    I wish I had bought this stock at $1.51 . A little over a year later and it's at $ 5.45

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