The Yellow Brick Roadway and The Economy
YRC Worldwide (YRCW), formerly known by the fantastic Yellow Roadway merger (between Yellow’s acquisition of Roadway and their later acquisition of US Freightways) is by far the largest less-than-truckload (LTL) transportation provider in the US. On Wednesday they lowered earnings guidance partly due to expense overruns.
However, the real story appears to be that their expenses were in line with their expectations but revenue was not. Per the press release, “In addition to general competitive pressure, some of our large retail customers have made significant inventory adjustments in the quarter, which have impacted our business levels.”
Keep in mind, the original guidance was for $1.00 – $1.05 in EPS, and the new guidance is for $0.65 – $0.70. That is not a little miss. Sounds like one or more fairly large retailers are cutting back orders and working down existing inventory. That, in turn, suggests possible weakness in the consumer sector. And that, combined with this, could mean a significant slowdown in GDP ahead.
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