What happened
Shares of Yellow Corp. (YELL 98.67%) jumped more than 20% on Thursday following the company's third-quarter earnings release. The long-struggling trucking company did significantly better than expected in the quarter, and investors are climbing aboard today as a result.
So what
On Wednesday after markets closed, Yellow Corp. reported third-quarter earnings per share (EPS) of $0.16 on revenue of $1.3 billion, showing much greater earnings power than what was predicted by analysts, who had forecast $0.01 in EPS on $1.3 billion in sales.
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Management said that it is benefiting from supply chain bottlenecks, which are creating high demand for transportation services. But the industry is also suffering from issues (including a shortage of drivers) that have tripped up other trucking companies in the quarter, so strong results were not guaranteed.
"Capacity across the U.S. supply chain remains constricted with limited ability to expand primarily due to the tight labor market," CEO Darren Hawkins said in a statement. "In the near term, we are leaning into our yield strategy to help manage through the market labor headwinds and focus on reducing purchased transportation expense as a percentage of revenue."
Now what
Yellow Corp. is in the middle of a multiyear turnaround after being left by the road last decade when the company took on massive amounts of debt to consolidate the industry. Hawkins and his team have done a good job cutting costs. The operating ratio, a measure of efficiency, was the best it has been since the fourth quarter of 2018.
With today's jump, shares are now up 157% year to date, but the stock is still below where it traded in early 2018. The current high-demand, high-cost environment is dangerous for trucking companies, and Yellow Corp. showed in the quarter that it is navigating the environment well. If it can continue, there is still room for the stock to go higher from here.
