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3 21-2013-yrcw-buy
- 1. NASDAQ: YRCW 3/21/2013 Turner Novak Eric Graverson NYSE: UPS
- 2. Proposal • Sell 47.359 shares of UPS @ 83.00 • Originally bought for $71.52 per share • 8.527% of portfolio • Buy 300 shares of YRCW @ $8.62 • $2,586 • 5.60% of portfolio
- 3. Overview of UPS • Global transportation company • Involved in the LTL business with YRC • Main competitor is FedEx and the US Postal Service
- 5. Reasons to Sell UPS • Realize our 19% gain • US Postal Service will keep Saturday deliveries – Lost an opportunity for UPS to steal market share • Opportunity cost – YRCW is a better opportunity in the same industry SELL! SELL! SELL!
- 6. YRC Overview • Founded in 1924 • Overland Park, KS • 32,000 Employees • 4th largest LTL Carrier by Revenue • Customers include Wal- Mart, Perrigo, and large manufacturers • Ships freight for companies that lead the U.S. economic recovery
- 7. YRC Over the Past 18 Months
- 8. Less-Than-Truckload (LTL) • Ships product from Point A, to Point B, to Point C, to Point D • Product is transferred at each terminal Truckload (TL) • Ships product from Point A to Point B Trucking Industry YRC is an LTL Carrier
- 10. Industry Comparison • Undervalued compared to the industry • Financial liquidity is near industry average • Institutions are selling, insiders are buying
- 11. Industry Comparison • Why are the total NET Assets (Assets – Debt) worth 10 times more than the total value of the company? • Cash and earnings from operations worth over 2 times more than the value of the company?
- 12. YRC in the Past • Revenues dropped from $9.6B to $4.8B • Net Income dropped from $275M to - $140M • Known for poor customer service
- 13. Revenue USD (Billions) Last 6 Years • Industry leader in 2007 • Revenue decreased during recession • 3rd in 2012
- 14. Net Income USD (Million) Last 7 Years • Industry leader in 2007 • Last in 2012 • Room to improve in cutting costs
- 15. • The market thinks YRC will fail • We don’t blame them • But here is why they are wrong
- 16. YRC in the Future • Cutting costs – Consolidating terminals – Reducing workforce • Restructuring executive management team • Improving customer service – Intensive training
- 17. Net Income USD (Million) • Is YRC finally turning the corner? • How will they get there?
- 18. YRC in the Future • Hired consulting firm MAVEA to help turn around the company • CEO of MAVEA, Larry Wilson, bought shares of YRC a few weeks before the contract was signed • Larry Wilson is also on the Board of Directors of another company that has seen a 50%+ increase in share price during its turnaround, Yahoo
- 19. Earnings Call Takeaways • Beat analysts estimates for the first time in 4 years • Positive operating income for the first time in 6 years
- 20. Earnings Call Takeaways • Verbal offers to lease almost 100% of revenue equipment purchases in 2013 – Operating leases – Decrease in CapEx, increase in FCF • New company culture to reduce workers compensation claims (injuries on the job) – Injury frequency improved by 20% • Reducing work force to improve efficiency
- 23. Earnings Call Takeaways • New management team – Marketing and sales focused – Sales and operations driven • Decreased cargo claims ratios by focusing on better freight handling
- 24. Balance Sheet • Convertible Bonds when stock price hits $14 and $36 • Will lower Interest Expense if converted, which will raise EBITDA, but also dilute shares • Neutral effect on EPS
- 25. News • WalMart named YRC the LTL carrier of the year • Announced job cuts of almost 500 employees on Monday – Price jumped 15% that day • Trading volume trending upwards • Will analysts raise price targets?
- 30. As the Risk goes down the Price will go up
- 33. Risks • Earnings don’t increase like we are projecting • Share dilution • US economy does not recover, which is driving growth in the trucking industry
- 34. • Backbone of the U.S. economy • Very undervalued with 0.08 P/B – Failure is priced into the stock • IPO needs to take on more risk than just UPS, Home Depot, etc. • High risk, high reward Investment Thesis BUY! BUY! BUY!
- 35. Proposal • Sell 47.359 shares of UPS @ 83.00 • Originally bought for $71.52 per share • 8.527% of portfolio • Buy 300 shares of YRCW @ $8.62 • $2,586 • 5.60% of portfolio