Wolfe Research suspended its “underperform” stock rating for YRC Worldwide pending a more complete fourth-quarter and full-year earnings report from the company.
“Without visibility into its multiple covenant amendments, we are not comfortable at this time with a stock rating,” said transportation analyst Edward M. Wolfe.
YRC Worldwide’s stock price has been volatile, edging upward in the weeks since shareholders approved a debt-for-equity swap Feb. 17. That deal wiped out $464 million in debt and created hundreds of millions of new shares of company stock.
The stock price fell to a low of 36 cents per share Feb. 22 before climbing to 44 cents per share March 1. The stock peaked at $5.86 last September, but fell rapidly once the debt swap was announced in November. It last traded above a dollar in January.
“We expect the stock to remain extremely volatile on a daily basis as we have seen in recent days, as its share count has surged from 60 million to 1.02 billion,” said Wolfe.
With hundreds of millions of new shares, there’s more stock for aggressive traders to buy and sell. That behavior may be reined in when the company completes an expected reverse stock split, reducing the number of shares and boosting their value. However, that stock split is more than a month away, Wolfe said in a note to investors.
YRC Worldwide didn’t report its after-tax loss in its most recent earnings report, citing “numerous complexities” in the tax valuation of its recent debt-for-equity swap.
The company said it would include complete financial information in its annual report, which Wolfe said is expected shortly, possibly later this week.
YRC Worldwide reported a pre-tax profit of $49.8 million in the fourth quarter, buoyed by a net gain of $194 million on its note exchange. It had a $95.4 million operating loss.
For the full year, YRC Worldwide reported an $899 million loss before taxes, compared with a $1.1 billion operating loss and $974.4 million net loss in 2008.
Its operating revenue plunged 41 percent in 2009 to $5.3 billion, compared with $8.9 billion in 2008 and a high of $9.9 billion in 2006.
Contact William B. Cassidy at firstname.lastname@example.org.