Yellow Roadway Corp. and USF Corp. both saw their shares drop in pre-opening trading today, according to an online report by MarketWatch. The hit to USF resulted from its announcement that it expects diluted earnings per share for the first quarter of 2005-- in the range of $0.12 to $0.16 vs. $0.32 for the prior year period. Yellow Roadway was impacted by the USF guidance because of its $1.47 billion bid to acquire USF.
Satish Jindel, president of Pittsburgh-based transportation consulting firm SJ Consulting, told Fleet Owner that the share slump is a "company-specific situation" and not reflective of industry-wide conditions. "This is not indicative of a change in the whole freight market," said Jindel. "I am fairly comfortable that when FedEx, Old Dominion and others release their results, we will not see such a contrast with year-earlier figures.
"USF is in a difficult situation," he continued. "There has been much management change plus customer distraction caused by the buyout [by Yellow]. However, the acquisition is not driven by performance in one quarter but by the value of the [USF] enterprise; the value of the regional network has not changed. The regional operations of USF are a good fit with the long-haul infrastructure of Yellow Roadway," added Jindel.
Indeed, Yellow Roadway remains undaunted in its quest to acquire USF. The company stated it "remains confident that the acquisition of USF Corporation will provide significant value" for shareholders of both firms.
"The first quarter results at USF do not change our assessment of the value of this strategic acquisition," said Bill Zollars, chairman, president & CEO of Yellow Roadway. "Given their first quarter revenue growth and tonnage increase, we believe the business fundamentals remain sound.
"Once we have the opportunity to leverage the combined expertise of Yellow Roadway and USF," Zollars added, "and pursue synergy opportunities of $150 million, we are confident that additional value will be created."
USF stated today that "primary reasons" for its year-over-year decline in diluted earnings per share, excluding significant items, were:
- A slowdown in the automotive sector that resulted in reduced volumes and productivity in the Midwest region
- Slower than anticipated growth in the Northeast for the first quarter '05
- Southeast region remaining very competitive from both a density and pricing perspective
In addition, USF said positive highlights for the first quarter '05, excluding significant items, were:
- High single digit year-over-year LTL revenue growth
- Mid-single digit year-over-year LTL tonnage growth
- USF Glen Moore and USF Logistics performing at or above expectations
USF said its first quarter '05 results will be announced on April 22, before the market opens.