Dahlman Rose: YRCW's Operations Continue To Improve

YRC Worldwide YRCW reported 4Q10 EPS of $0.49 after the exclusion of an $0.11/sh gain related to discontinued operations. However, the $0.49/sh result reflects a much higher-than-expected tax benefit of $93 MM vs its assumption of a tax benefit of $2.2 MM. If Dahlman Rose was to apply its $2.2 MM tax benefit assumption to the company's operating results, the bottom line would come in at a loss of $1.42/sh vs its estimate of a loss of $1.51/sh. YRC Worldwide indicated that the pricing environment continues to improve with the Fall general rate increase holding up well. Also, contractual increases continue to track ahead of last year as the company focuses on efforts to improve the customer mix. The changes in the customer mix had a positive impact on both the National and Regional business segments. Dahlman Rose sees EBITDA as a more accurate measure of YRCW's performance as EPS could vary widely depending on how the capital structure shapes up. Due to a somewhat slower than originally expected LTL recovery and ongoing challenges at YRC Worldwide, it is lowering the 2011 and 2012 EBITDA estimates to $210 MM and $321 MM from prior estimates of $259 MM and $330 MM. Dahlman Rose has a Neutral rating on YRCW YRCW is trading lower at $4.33