Friday, July 29, 2011

Analyst Community Divided on YRCW? Amazing!

Wall Street's permanent bullishness even extends to companies that consistently lose money.  YRCW's problems are so bad that analysts have to grasp at ephemeral straws to have something to write about.  Note that the analyst community acknowledges the horrendous dilution and cash problems but some folks still want to reach for things like revenue that beats estimates.  My readers can be forgiven for not knowing analyst tricks like lowering one's revenue estimate so that even disappointing news can beat it. 

Equity analysts still looking for a bull case on YRCW all know the following.  S&P has just downgraded the company's credit rating to "selective default."  Credit analysts know that the recap is forced.  The company is planning another reverse stock split, obviously an effort to avoid de-listing immediately after the recap dilutes its share price to under a nickel.  Any speculator hanging on for dear life right now is going to end up with a tiny sliver of nothing in a few weeks.  The entire LTL sector knows the cost of culling unprofitable customers and routes.  YRCW's forced sales of distribution centers will drive their network disruption costs even higher at a time when it needs to keep operating costs low. 

Analysts write for a living.  In the face of overwhelmingly negative facts, some i-banks must think they can finagle future business out of troubled companies by playing up whatever small turnaround chance exists.  I-bankers should note that YRCW has likely executed its final restructuring.  The only business they can squeeze out of this company would be more asset sales (like a spinoff of its China unit, a totally unnecessary acquisition if there ever was one).

Full disclosure:  No position in YRCW at this time or any other time.