Shares of Yellow Corp. lost a fifth of their value Feb. 10 after the company’s leaders reported a steep drop in fourth-quarter volumes and said their work to streamline their network is taking longer than expected.
Nashville-based Yellow (No. 6 on the FleetOwner 500: Top For-Hire Fleets 2023) posted a fourth-quarter net loss of $46.8 million, an improvement from the nearly $59 million loss from late 2021, on revenues of $1.2 billion that were down 8% from the prior year. Operating income slipped to $40.3 million from $55.8 million, with a 22% year-over-year jump in revenue per hundredweight unable to offset a 27% drop in total tonnage per workday.
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CEO Darren Hawkins is reorganizing Yellow’s operations (which comprise USF Holland, New Penn, YRC, and others) into a single super-regional carrier under the Yellow brand. Part of that strategy has included sacrificing some business—through the first three quarters of last year, daily tonnage had been down nearly 19%—but Hawkins and CFO Dan Olivier told analysts they were surprised by the drops in volume they saw late last year. That led them to, among other things, cut a number of jobs and bring Yellow’s year-end payroll to about 30,000, roughly 2,000 fewer than at the end of 2021.
Hawkins said a slowdown among Yellow’s manufacturing clients during the quarter added to a pullback the company (and industry) was seeing from some retail customers but added that January was above Yellow’s historical ebbs and flows.
Still, Yellow’s trends led to some pointed questions from analysts about Yellow’s performance versus the overall freight market, which showed tonnage down single digits late last year. (Standing out from the crowd in that respect was XPO Inc., which grew its less-than-truckload tonnage in Q4.) Hawkins said he’s focused on improving the yield from Yellow’s work and positioning the company for the upturn many market participants and watchers are expecting later this year.
“We will be poised and ready when the demand cycle changes,” Hawkins said, adding that he thinks infrastructure investments underway will hurt the supply of drivers. “I think we’ve got an opportunity to see demand exceed capacity and Yellow will certainly be ready for that.”
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Three months ago, Hawkins told investors and analysts the One Yellow rationalization program’s second phase, which covers the eastern half of the country, would be completed by the end of 2022. This week, he said that work will be done “in the coming weeks” and said the Yellow team is meeting with labor union representatives about the plan.
“We do plan to communicate externally when the implementation date is set. But phase two is still moving forward,” he said. “With the number of employees, local unions and also the importance of the number of customers involved, we’re certainly being very stable and focused in the way we’re approaching phase two.”
Because of the delay in wrapping up the second phase of One Yellow as well as wanting to wait until they “maybe have somewhat of a clearer picture of the economic environment,” Olivier said the executive team isn’t yet laying out its 2023 capital spending plans. The company spent $192 million on equipment and other capital projects last year, a number Olivier said would have been higher by about $14 million because some tractor orders were delayed.
Shares of Yellow (Ticker: YELL) fell nearly 20% to about $2.67 in trading Feb. 10. Over the past six months, they have lost more than 60% of their value, cutting the company’s market capitalization to just $140 million.
