What happened
Shares of Yellow Corp. (YELL) drove off a cliff on Thursday, with the stock falling by nearly 30% after the trucking company reported underwhelming quarterly results.
So what
On Wednesday evening, Yellow reported a first-quarter loss of $1.26 per share, well below the $0.64 consensus despite generating revenue that, at $1.2 billion, was slightly better than expectations. The company blamed winter weather, saying bad storms had a $16 million negative impact on operating income.
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"The severe winter weather, including a generational storm in the southern United States, significantly impacted our first quarter results," Yellow CEO Darren Hawkins said in a statement. "In February, roughly two-thirds of the 322 terminals in our network were either closed or had limited operations for some period. Our line-haul operations were also impacted by suspended service at various times."
Different trucking companies have exposure to different areas, but the results stood in stark contrast to the estimate-beating quarters posted by truckers including J.B. Hunt Transport Services and USA Truck. More broadly, transportation and logistics companies have been reporting strong demand and pricing trends, likely contributing to the market's disappointment with Yellow's results.
Now what
With the weather impact now in the rearview mirror, Hawkins said he is optimistic about the quarters ahead. Capacity is tight, he said, driven by an improving economy and consumer optimism. Yellow is increasing driver recruitment and hiring in anticipation of growing demand, and during the quarter took delivery on more than 1,100 tractors, 1,600 trailers, and 140 containers.
It all sounds good, but Yellow has been a chronic underperformer in recent years that is only now starting to show signs of stabilizing and getting back on the road. Based on Thursday's stock reaction, investors are taking a wait-and-see approach instead of buying in on the optimistic talk.
