Shares of trucker YRC Worldwide (NASDAQ:YELL), formerly known as Yellow Roadway, raced ahead 16.9% in the month of June.
Unprofitable for the better part of a decade, YRC Worldwide finally emerged into the black in 2015, and grew its profits strongly in 2016, earning $21.5 million that year with modestly positive free cash flow.
Now, YRC has historically earned most of its profits in the middle of the year -- its second and third fiscal quarters. So why did YRC stock soar in June? The reason is more than just "because the company is about to report its Q2 results, and Q2 is usually a good quarter for the company." This year's Q2 is looking even better than last year's.
On June 8, YRC reported that it had enjoyed a 6.2% year-over-year jump in tonnage of goods carried on its YRC Freight trucks in April, followed by a more muted gain of 3.3% in May. By the end of May, YRC noted that its "revenue per hundredweight, excluding fuel surcharge, increased approximately 0.3%." (A "hundredweight" is 100 pounds of cargo.).
The company's regional shipping segment saw opposite -- but still good -- dynamics. Tonnage grew a modest 1.4% in April and a more robust 5.5% in May, and "revenue per hundredweight, excluding fuel surcharge, decreased," but only "approximately 0.1%."
What does this imply for YRC stock as we approach the Q2 earnings season? Higher shipments and more revenue on those shipments in YRC's flagship freight division, which accounts for 70% of the company's revenue, is certainly good news. Higher shipments on only slightly weaker revenue in regional transportation isn't great news, but it's probably not too bad, either.
All of this suggests that analysts' prediction that YRC will see its profits decline year over year in Q2 (from $0.83 last year to $0.55 this year) could prove overly pessimistic. If trends like YRC reported last month held true through June, it's entirely possible that YRC will deliver an upside surprise to analyst estimates -- and YRC stock could move higher still when it reports at the end of July.