Nearly every transportation CEO is worse than James Welch. His focus has been on having YRCW stay in business and meeting service level guarantees. Everything else is secondary. Purchasing transportation to meet service level guarantees has made YRCW unprofitable every other quarter.
It's been a long slog, but YRCW has managed to stay in business. The underpaid, unionized work force has much lower turnover than well paid, non union competitors. Unionized drivers have a much better working life than their non union well paid competitors; that's why they don't leave.
YRCW is going to stay in business. It will not be taken over. YRCW won't go out of business because the underlying value of the firm -- ignoring pension liabilities -- is over $1.5 billion. It won't be taken over because the buyer would have pay off the pension liabilities and the buyer would NOT get operating loss carry forwards to match up against profits because the way the tax law works those losses can't be used.
Could some of the operating companies be sold away, unencumbered with the pension liabilities? That's possible, but it would not make sense. They are finally working together pretty well with YRCW freight and selling them away now would make everything less efficient and less effective.
So what happens when Hawkins takes over in July? YRCW continues to slog through, slowly paying down debt and upgrading the fleet and the workforce. Sometime in the next 2 or 3 years, after there are 3 consecutive quarters with earnings, and the stock moves up to trading above 30, YRCW will do a secondary offering of 17 million shares or so with a 3 million share over allotment for the underwriters priced between $25 and $30 with all of the proceeds used to pay down debt and to reduce the interest rates imposed by the operating leases for the new trucks and trailers. Debt will fall to less than $500 million and equity will exceed $1200 million instead of $1200 million in debt and just $50 million in equity in 2012.
Should you buy more YRCW here now while its cheap compared to other trucking firms? No. It'll get cheaper. Should you sell it short? Before most earnings reports, you can comfortably sell it short because there's always something that causes them to lose money. But don't hold on to buy it back; it will move up into the next disappointing earnings report. Sometime in the next two years or so as the economy turns down slightly and it becomes easier to get good new drivers and as the average age of the fleet goes under 5 years, the operating ratio may finally consistently fall below 96. That's when buying YRCW to hold on to it will makes sense.
YRCW has managed to hold onto $4800 million of sales year after year. Once the operating ratio consistently falls below .96, sales are likely to slowly rise a third or so inside of the next 3 years. In 2023, if everything works out, maybe $6.5 billion in sales, $400 million in earnings with 50 million shares and a $28 stock price -- that's a best case scenario.
Will YRCW get back to a $10 billion market cap like in 2005?
It's possible. It's not likely.
You could win Powerball and MegaMillions in the same week.
You could get hit by lightning while riding the NYC subway below ground. It hasn't happened even once in 114 years, but it could happen.
Deion Sanders hit a home run for the Yankees and scored a touchdown for the Falcons in the same week. Some day some other player may do the same thing.
YRCW may get back to a $10 billion market cap. Don't count on it, tho.
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