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August 4, 2022 11:43 AM, EDT

LTL Carrier Yellow Reports Strong Q2 Earnings

Yellow Corp. truckYellow's second-quarter operating income increased to $99.2 million compared with $27 million in the 2021 period. (Yellow Corp.)

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Leaders with less-than-truckload carrier Yellow Corp. are touting the company’s fifth successive quarter of financial improvement and strong second-quarter earnings that beat Wall Street expectations.

The Overland Park, Kan., company on Aug. 3 said Q2 revenue was $1.42 billion compared with $1.31 billion in the year-ago quarter. Operating income also increased to $99.2 million, or $1.17 per share, compared with $27 million, or minus 18 cents, in the 2021 period.

Wall Street analysts told CNN the expectation was that Yellow would generate $1.4 billion in revenue and report 45 cents per share in the quarter

2Q 2022 Yellow Corporation Earnings Release 3 by Transport Topics on Scribd

Operating ratio improved to 93 from 97.9 in the year-earlier period. Operating ratio measures a company’s expenses as a percentage of revenue and determines efficiency. The lower the ratio, the better the company’s ability to make a profit.

At 2022’s midpoint, Yellow is in an improved position when measured against 2021. The carrier generated $2.68 billion in revenue compared with $2.51 billion, and income was $108.4 million versus a loss of $6 million.

Leadership said several factors are behind Yellow’s financial improvement.

Darren Hawkins

Hawkins

“Strong yield and efforts to manage the use of purchased transportation helped Yellow achieve its highest quarterly operating income in 15 years,” CEO Darren Hawkins said in a statement. “Elevated demand for LTL capacity continued during the quarter, which drove the favorable pricing environment. On the cost side, purchased transportation expense was down to 14.5% of revenue in the second quarter compared to 16% a year ago.”

As another indication of the company’s improving financial condition, stock monitoring company Seeking Alpha noted that during the last year Yellow has exceeded the EPS estimates 75% of the time and beaten revenue estimated 100% of the time.

The company also said operating income included a $3.2 million net gain from property disposals.

 

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For the past several years, Yellow has been in the midst of putting all of its business divisions — Holland, New Penn, Reddaway, YRC Freight and Yellow Logistics — under one operating system called One Yellow.

The company believes getting all the companies on the same platform will significantly improve profitability and efficiency. Hawkins said the transition will be complete this summer, with the integration of the Reddaway Western network. The entire process is set to be wrapped up by the end of the year.

“We remain focused on integrating the four operating company networks into a single LTL network with national coverage, servicing regional and longhaul lanes. We expect to execute the integration of phase one in the western U.S. this summer, with the transformation of the entire network to be completed around the end of the year,” Hawkins said. “When this transformation is completed, our customers will benefit by interacting with North America’s second largest super-regional LTL network for both regional and longhaul shipments.

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“We expect the network transformation to also lead to improved asset utilization, enhanced network efficiencies, cost savings and create capacity without the need to add new terminals.”

Yellow said its revenue per every 100 pounds shipped, otherwise known as hundredweight, soared by 29.7% year-over-year.

The higher price of diesel fuel was a major factor in the increase with nearly 50% of that rise coming from fuel surcharges that jumped in the second quarter. Revenue per shipment climbed nearly 28% year-over-year, and the company said half of that increase came from fuel surcharge revenue.

The company also lowered its full-year capital expenditures outlook from earlier projections.

“Primarily due to limited tractor and trailer production capacity at the original equipment manufacturers, we are lowering our capital expenditures guidance,” Hawkins said. “For 2022, we expect our total investments in capital expenditures to be in the range of $250 million to $300 million compared to the previous range of $325 million to $400 million.”

Yellow Corp. ranks No. 10 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. 

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