Please ensure Javascript is enabled for purposes of website accessibility

Why YRC Worldwide Stock Just Jumped 10%

By Rich Smith - Aug 22, 2018 at 1:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An upgrade helps to lift YRC investors' spirits -- and their stock.

What happened

Shares of trucker YRC Worldwide (YELL 0.53%) leapt more than 11% in early trading Wednesday and are still up a respectable 9.7% as of 11:45 a.m. EDT. You can thank Deutsche Bank for that.

This morning, the German banker announced that it met with YRC management and came away impressed with the new CEO's turnaround plan. It believes YRC will improve "pricing," "yield" -- and share price -- this year.

Three YRC trucks in a row

One analyst thinks YRC stock is driving toward a recovery. Image source: Getty Images.

So what

Deutsche upgraded shares of YRC Worldwide to buy, based on its belief the company is back on the right track to recovery. With a $13 target price on the shares, Deutsche's new rating implies that new buyers of YRC stock today could enjoy as much as a 30% profit one year from now.

That alone explains why investors are rushing to buy the stock today -- and with 20% more profits in store, why they might continue buying YRC stock in the days to come (assuming Deutsche is right).

Now what

Is Deutsche right? YRC Worldwide's trailing-12-month profits are negative, the company lost money in two of its past four quarters, and burned cash in three of those quarters. The company remains heavily in debt, with $734 million more debt than cash on its balance sheet, and it's been driving on the brink of bankruptcy for years.

Still, recent developments have shown YRC enjoying slightly stronger sales and an improvement in free cash flow in its two most recent quarters. The stock remains a gamble, but the more improvements it makes, the safer the bet will get.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Yellow Corporation Stock Quote
Yellow Corporation
YELL
$3.80 (0.53%) $0.02

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
356%
 
S&P 500 Returns
124%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.