Yellow's Turnaround Moves Forward; Q4 Ahead Of Forecasts

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Less-than-truckload carrier Yellow Corp. continues to use a strong freight environment to purge less profitable freight from its network in favor of higher-yielding shipments.

Yellow YELL reported adjusted earnings per share of 20 cents for the fourth quarter after the market closed Wednesday. The result excluded a noncash, nonoperating loss of $55 million related to annuitizing and transferring nonunion pension plans to an insurance company. The adjusted result was better than the consensus estimate calling for a loss of 13 cents per share.

Revenue increased 12% year-over-year to $1.31 billion as tonnage declined 10%, with revenue per hundredweight increasing 23% (up 16% excluding fuel). The tonnage declines are expected to continue in the near term and ease as the year progresses. Tonnage in January was down 14% year-over-year. Management said that decline was due to omicron-related work outages in addition to its efforts to cull out less desirable freight.

Contracts renewed 9% to 10% higher in the fourth quarter and were up between 8% and 9% in January.

The company's operating ratio normally sees 200 basis points of deterioration from the third to the fourth quarter each year, but it improved 60 bps in the 2021 fourth quarter as price improvements more than offset cost inflation. At 95.7%, the OR was 310 bps better year-over-year.

Salaries, wages and benefits as a percentage of revenue were 370 bps lower year-over-year, and purchased transportation expense was down 260 bps. The decline in purchased transportation costs was in part due to the volume declines, but it was also tied to the integration of its linehaul network. Yellow's restructuring includes collapsing all of its separate carriers into one super-regional carrier operating on the same tech platform. The changes are expected to remove redundancy across operations, including the linehaul routes.

Fuel and supplies expenses were a headwind, up 200 bps in the period.

Table: Yellow's key performance indicators

The company ended the year with $359 million in available liquidity, an $81 million year-over-year reduction. Outstanding debt increased $331 million to $1.62 billion as it purchased equipment and bought out leases.

The company was active in 2021, taking delivery of tractors, trucks, trailers and containers as part of a $700 million COVID relief loan agreement with the government. The funds were used to upgrade 2,400 tractors (17% of the fleet) and 3,600 trailers (9% of the fleet).

Capital expenditures are expected to be between $325 million and $400 million in 2022, down from the $498 million recorded in 2021. Management said the spend in 2022 is more representative of the capex budget going forward. By comparison, the company's 2020 capex totaled $141 million.

Adjusted earnings before interest, taxes, depreciation and amortization were $306 million in 2021, a 59% year-over-year increase.

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes Yellow Corp. (No. 5).

Click for more FreightWaves articles by Todd Maiden.

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