Replies to post #20477 on YRC Worldwide Inc (YRCW)

[yesmistermorningstar]

Shift to dimensional pricing gains momentum

YRC is joining FedEx, UPS, and ODFL in basing some of its pricing on shipment size.

The move toward dimensional pricing continues. FedEx Corp. recently made headlines by announcing that starting Jan. 1, 2015, it would price ground parcel shipments measuring less than three cubic feet by size rather than weight. This will likely result in significant rate increases for lightweight, bulky shipments that take up a lot of space in the company's vans.

FedEx is far from the first to go the dimensional pricing route. Old Dominion Freight Line (ODFL) pioneered the practice in less-than-truckload (LTL) transportation a few years ago. More recently, UPS Freight, the LTL unit of UPS Inc., rolled out a density-based pricing program for interested shippers. Now, LTL carrier YRC Worldwide has similar plans. The company expects to install 38 automated "dimensioners" to measure and weigh items at some of its YRC Freight terminals by year's end. YRC also has a pilot program to install dimensioners at some locations operated by its YRC Regional unit, CFO Jamie Pierson said in a conference call to discuss the company's first-quarter results.

Pierson told analysts that the dimensioner technology helps the company more accurately measure the cubic volumes of a larger percentage of its shipments. "The capture of precise shipment dimensions improves our ability to determine the true cost of each shipment based on weight and space utilized," Pierson said during the call. And in words that won't be music to the ears of pillow, lampshade, and feather shippers—whose lightweight products have long been priced by weight rather than by cubic volume—Pierson added that the equipment "positions us to accommodate a shift in the market toward density-based pricing methodologies."

See also :

http://blog.tranzact.com/2-minute-warning/watch-out-for-dimensional-parcel-pricing-fmcsa-driver-coercion-rulemaking

[GuyBig]

I hope YRCW makes money f/q/e 6/30/14. There have been repeated negative earnings surprises. I was writing up what I think could cause negative earnings surprises this time. Of course stolen trucks and trailers would be insured. I think the most likely cause of losses could be problems with new hires and perhaps some terminals having been closed that should have stayed open. Also, bad weather.

Demand appears to be picking up. YRCW's experienced unionized work force has the capacity to meet demand and EXCEED shipper expectations. If everything goes right -- and nearly two months into the quarter -- everything appears to be going right. That means YRCW would not only meet earnings expectations, but might also have a HUGE positive earnings surprise. I do not expect that.

Pricing transportation by density and package dimensions, not just by weight, seems like an obvious way to increase revenue and profits. A quarter of one percent additional revenue going straight to the bottom line would be over $3,000,000 -- about 10 cents a share. Just because something is obvious -- pricing by density -- doesn't mean it can or will happen. Wheeled luggage could have existed 50+ years ago, instead of just catching on 30+ years ago.

Recruiting drivers from Western Europe is a great idea.