Shares of trucker YRC Worldwide ( YELL 11.26% ) closed down 14% on Friday after analysts at Stifel Nicolaus -- who had previously recommended the stock in hopes of seeing at least "one good quarter" of growth -- finally gave up and admitted that quarter "may not come."
Stifel downgraded YRC stock to neutral today, and TheFly.com noted that the analyst also cut the price target by more than half, to just $7 a share.
Given that YRC stock was already trading close to $7 when this downgrade came out, you might have expected investors' reaction would be a shrug -- but no such luck. Instead, Stifel's lamentation that, despite a strong market for less-than-freightload trucking this year, YRC "has fallen short of expectations" and "failed to return to 2015-16 levels of profitability" appears to have sapped investor confidence.
When Stifel then proceeded to observe that YRC's labor contract with its drivers expires in just a few months, raising the specter of a potential strike, it sparked a rout in the stock.
With YRC stock now trading below Stifel's revised target price, there's still the potential for the stock to bounce back if investors decide they overreacted to today's downgrade -- but the company will need to do its part to encourage investors to come back. YRC is currently unprofitable, but Wall Street analysts still hope to see it end this year with a profit of $0.66 per share.
If YRC can prove them right in Q4, there's still a chance for a rebound before contract negotiations begin.