Standard & Poor’s revised its credit outlook for YRC Worldwide from “stable” to “developing” Oct. 17, citing better performance and liquidity at the $4.9 billion trucking operator. That helped propel YRC stock up 5 percent to more than $7 a share by midday Oct. 18.
S&P maintained its “CCC” junk-bond rating for the company, which has lost more than $3 billion since 2006 and is struggling to return to profitability. But the revised outlook is a sign that the ailing less-than-truckload giant is getting healthier.
“We could raise the ratings if the company addresses its significant debt maturities in 2014 and maintains adequate covenant cushion,” S&P said in a statement. YRC Worldwide’s “substantial” LTL market position “is a positive,” S&P said.
The company’s chief operating unit, YRC Freight is the third-largest U.S. LTL carrier, after FedEx Freight and Con-way Freight. In the second quarter, YRC Worldwide reported an operating profit of $15.5 million on $1.251 billion in revenue.
That was the first quarterly operating profit for YRC Worldwide since 2008. The Overland Park, Kan.-based trucking operator had a net loss of $22.6 million in the second quarter, compared with a $43 million net loss the prior year.
Earlier this year, YRC Worldwide’s lenders agreed to reset the financial covenants that underpin the company’s restructuring. The lenders, which own a majority stake in the company, brought the covenants in line with YRC’s financial targets.
At the same time, long-haul LTL carrier YRC Freight streamlined its LTL network to speed shipments and reduce freight handling in transit. The company also is rolling out new technology to better manage the flow of shipments and dock operations.
YRC Freight lost $5.1 million in the second quarter on $821.1 million in revenue. YRC Worldwide's regional carriers — Holland, New Penn Motor Express and Reddaway — are already in the black, with a $22.6 million operating profit in the second quarter.