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Research: YRC Worldwide

  • this is from a Stifel note
  • they started YRCW at hold, $5 target

we don’t expect much focus on a company employing union workers in an election year that is going to be usingthe money to buy equipment from U.S. manufacturers.

  • YRC has oldest fleet in the industry
  • new trucks will save $20k per year in opex
  • if they spent $400mm on new tractors, run rate EBITDA would improve $60mm by YE 2021
  • even a 5-year old truck would be newer than their fleet right now
  • when you add the $700mm from the gov’t onto existing debt total debt is $1.57b by YE 2021
  • the EBITDA increase from the new equipment isn’t likely to be beyond $60mm IMO – in the YRC Q2 call they said:

our maintenance expense for a 1-year unit is somewhere in the $1,000 to $2,000 range. Obviously, a full powertrain warranty. And you might ask why $1,000 to $2,000, well you’ve got few — I mean, you’ve got brakes, you’ve got antifreeze, you’ve got oil. You got everything that goes with the daily maintenance of that unit. And then you go out to 5, 6, 7, 8, 9, 10 years, you get in into a number that is probably closer to $11,000, $12,000. So we can easily clip a 10,000, maybe a little bit more coupon per tractor on maintenance expense alone and does nothing to take into consideration what we can get on miles per gallon and fuel efficiency.

  • so really, you’ve got a market cap of $170mm and a 2021 EV of $1.74b – even at $300mm EBITDA you are at almost 6x EV/EBITDA
  • when I look at an ArcBest they are cheaper than that (~4x EV/EBITDA) and a better company.  The idea that YRC should trade at any premium to the average trucking name is kinda crazy
  • its been a nice run but really this was just about getting a ramp from the short interest and the government bailout.  It is probably time to get out
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