Will Another Trucker Pick Up YRC?

A Zigzag Path
For three years, CEO William Zollars expanded Yellow Transportation through acquisitions. Yellow bought Roadway in 2003 and USF in 2005. Renamed YRC Worldwide (YRCW ), the company is the largest publicly traded carrier that accepts shipments of less than a full truckload. Now, YRC is burdened with dismal earnings because of higher fuel costs and bad weather. The stock slid from 45 in April to 39.43 on May 23. The talk is that YRC may be a buyout target. Zollars says: "It's always possible, with all the liquidity around, as shown by the bid for Chrysler (DCX )." Big truckers see YRC as a tempting asset play. Now selling at a low 9.4 times the 2008 earnings forecast of $5.25 a share, YRC offers "compelling earnings power and potential value," says Justin Yagerman of Wachovia Securities (WB ), which owns shares. He rates the stock "outperform" and thinks it could be worth 53. He sees earnings of $4.06 a share in 2007, vs. $5.01 in 2006. Arthur Hatfield of Morgan Keegan, who also rates it outperform, says the big driver ahead for YRC would be better-than-expected earnings as the freight environment recovers.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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