YRC Worldwide Inc., in an unusual mid-quarter update, said tonnage and revenue per hundredweight increased in July and August at its long-haul and regional less-than-truckload (LTL) units, setting the stage for what the company said should be a solid third quarter.
YRC, based in Overland Park, Kan., said its long-haul unit, YRC Freight, posted daily tonnage gains of 2.4 percent in July and 0.8 percent in August, compared to the same periods in 2013. The unit's revenue per hundredweight, a key metric of yield performance, rose year-over-year by 2.8 percent in July and 3.3 percent in August. YRC's regional LTL operations reported a 1.5-percent year-over-year increase in revenue per hundredweight in July and a 0.6-percent gain in August as well as daily tonnage increases, year-over-year, of 4.2 percent in July and 3.7 percent in August.
As a result of the July and August performances, YRC estimated that its third-quarter operating income should be $16 million to $21 million higher than reported operating income in last year's third quarter. Earnings before interest, taxes, depreciation, and amortization (EBITDA) should be $13 million to $18 million higher than last year's third quarter, the company said.
The company cautioned in a statement that the numbers are preliminary and that the estimates may not be realized. Its third quarter ends on Sept. 30.
In a note to investors, David G. Ross, transport analyst at investment firm Stifel, Nicolaus & Co., said the third-quarter results should be better than he originally expected. Ross said that quarterly volumes should be "decent" and that pricing strength should be maintained as long as the industrial economy continues to grow. Industrial freight is a large component of LTL traffic. Ross added that YRC was able to shed more of the higher costs associated with coping with a second-quarter surge in traffic than he thought. Volumes for many transportation carriers sprung back in the second quarter after bad weather in the first quarter paralyzed portions of the nation's shipping network.
Thomas S. Albrecht, transport analyst at investment firm BB&T Capital Markets, said the third-quarter numbers show improvement. Albrecht said that YRC Freight must improve its on-time delivery performance to 96 or 97 percent from 90 percent. He added that YRC Freight and YRC Regional need to get "far more aggressive" on pricing, calling on both units to hike rates by 5 to 10 percent across their broad account bases and not just on individual lanes. He also said the two units need to shed accounts that are marginally profitable or unprofitable.
One of YRC Freight's challenges has been the overreliance on large corporate accounts that use their leverage to strike excellent deals with the carrier. YRC Freight, which has struggled mightily for the past six years, would have risked collapse several years ago if it walked away from large accounts. However, with LTL demand gaining momentum and carriers remaining rational in their pricing, it is believed that YRC's large customers hold less sway over the carrier than they used to.
