Yellow rides most favorable LTL environment, posts $60 million net profit in Q2
Yellow Corp., which controls slightly more than 10 percent of the $46 billion-a-year less-than-truckload (LTL) market, is continuing its financial turnaround with one of its best quarters in a decade.
Yellow posted second quarter operating revenue of $1.424 billion and operating income of $99.2 million, which included a $3.2 million net gain on property disposals. In comparison, operating revenue in the 2021 second quarter was $1.313 billion and operating income was $27 million.
Yellow’s net income for second quarter was $60 million, compared with a net loss of $9.4 million in the second quarter of 2021.
Its earnings before interest, taxes, depreciation and amortization (EBITDA) were $145.9 million in second quarter. That’s a $63.0 million improvement compared with $82.9 million in the prior year comparable quarter.
“Strong yield and efforts to manage the use of purchased transportation helped Yellow achieve its highest quarterly operating income in 15 years,” Yellow CEO Darren Hawkins said in a statement. “Elevated demand for LTL capacity continued during the quarter which drove the favorable pricing environment. On the cost side, purchased transportation expense was down to 14.5% of revenue in the second quarter compared to 16% a year ago.”
Hawkins said his company is focused on integrating four operating company networks into a single LTL network with national coverage, servicing regional and long-haul lanes. This transformation is called “One Yellow” and appears to be producing early results.
Hawkins said he expects integration of phase one in the western U.S. this summer with the transformation of the entire network to be completed around the end of the year.
“When this transformation is completed, our customers will benefit by interacting with North America’s second-largest super-regional LTL network for both regional and long-haul shipments,” Hawkins added. “We expect the network transformation to also lead to improved asset utilization, enhanced network efficiencies, cost savings and (will) create capacity without the need to add new terminals.”
Because original equipment manufacturers have had limited tractor and trailer production capacity, Yellow is lowering its capital expenditures guidance. For 2022, it expects total investments to be in the range of $250 million to $300 million. That compares to the previous range of $325 million to $400 million, Hawkins said.
Yellow’s new-found efficiency is highlighted by a sharp increase in its operating ratio (OR). Its second-quarter OR was 93.0 compared with 97.9 in second quarter 2021.
This also coincides with strong pricing power by Yellow, which is expected to post around $5 to $5.5 billion revenue for the year. Including fuel surcharges, second quarter 2022 LTL revenue per hundredweight increased 29.7% and LTL revenue per shipment increased 27.8%, compared with the same period in 2021. Excluding fuel surcharge, second quarter LTL revenue per hundredweight increased 15.3% and LTL revenue per shipment increased 13.7%, Yellow said.
This increase in revenue occurred while 2022 LTL tonnage per workday decreased 16.4% when compared to second quarter 2021. That would indicate that Yellow is becoming more selective in its freight choices, paring some lesser-performing accounts from its portfolio.
In second quarter 2022, the Company invested $36.2 million in capital expenditures. This compares to $143.8 million in capital expenditures in the second quarter of 2021.
