Earlier this month international transportation service giant YRC Worldwide Inc. (NASDAQ: YRCW) completed the initial closing on the sale of a portion of its YRC Logistics brand, generating gross proceeds of approximately $38.7 million yet the financial stability of the Overland Park, Kansas-based company remains uncertain as it continues to try and drive itself out of the economic slump that nearly bankrupted the company last December.
Even after reporting a narrower second-quarter loss than expected on Aug. 3, 2010 shares in the company fell as much as 26%, a clear sign that the road ahead could be treacherous. While YRCW has said they have established “significant operating momentum” that could carry them through the rest of the year there are a number of doubts as to the plausibility of such optimism.
Among the biggest problems facing YRC Worldwide is competition as it battles with other heavyweights like Arkansas Best Corporation (NASDAQ: ABFS), Con-way Inc. (NYSE: CNW), Old Dominion Freight Line (NASDAQ: ODFL) and C.H. Robinson Worldwide (NASDQ: CHRW) along with the privately held FedEx Freight Corporation. Industry averages showed year-over-year quarterly growth at 4.20% yet YRCW fell 8.70%.
Couple the stiff competition that cost them customers along with a heavy debt load the company is currently carrying and it becomes clear how the company has gone from trading at a 52-week high of $6.18 on Sept. 24, 2009 to .21 just last week.
According to a report from Reuters on Aug. 3, 2010 there have been a number of significant factors that have contributed to the price pressure, including profit-taking along with the unease amongst investors concerning the stability of the company.
Despite the hurdles YRC Chairman Bill Zollars has pointed to several figures included in their second quarter results as a prime indicator that the company was heading in the right direction. Revenue per shipment grew despite the 18.6% drop in daily shipments compared to the same period last year. The company did see an improvement in shipments per day compared to the first quarter of 2010, increasing by 8% for national and 13.8% for regional, producing increased revenue of 0.9% and 0.5%, respectively.
Those figures inspired Zollars to state, “With the significant operating momentum we achieved throughout the second quarter and experienced in July, the company is positioned for further growth.”
Most analysts believe for YRC to have any shot it would have to continue to focus on shedding its debt while maintaining an aggressive restructuring plan that would allow the company to compete. The sale of YRC Logistics to Austin Ventures may be seen as a step toward refocusing on the company’s core transportation capabilities but that may not be enough. Part of the problem with YRCW is that it holds no real advantage over its competition and without that edge the road to a brighter future remains littered with obstacles.
Of course the uncertain future of YRCW carries some benefits to penny stock investors who have been eying the transportation company for some time. If things continued to go sour for YRCW the company could become a potential buy-out option or if the economy manages to get back on track the stock could find itself climbing, possibly resulting in a nice financial gain for those who get in low.
Short term indicators are split for YRCW. The 7 Day Average Directional Indicator and the 20 Day Moving Average vs Price are a “Sell” while the 10 to 8 Day Moving Average Hilo Channel and the 20 Day Bollinger Bands signal “Hold”. The 20 – 50 Day MACD Oscillator signal is “Buy”. The current volatility could pay off, yet also make the movement of shares difficult to predict. A fundamental analysis may prove more worthwhile than a technical one.
Currently, YRCW has a 200 day moving average of $0.59 and a 50 day moving average of $0.25. Also worth noting are the Bollinger Bands which can be seen in the chart below:
Technical Chart of YRCW
YRCW is a penny stock traded on the NASDAQ. Penny stocks are shares in public companies which trade below $5 per share.
