Trucking stocks rally as potential Yellow bankruptcy is factored in
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The trucking sector is reacting to news that Yellow Trucking Company (YELL) could be heading for a bankruptcy. Yellow (YELL) is facing severe financial pressure with outstanding debt as of March 31 of $1.5B.
Bank of America sees big upside for other trucking stocks if Yellow were to file for bankruptcy or restructure. A smaller Yellow fleet is forecast to materially drive LTL pricing higher. In looking at the sector as a whole, Analyst Ken Hoexter and team estimate that a year-to-date LTL demand decline in the mid-to-high single digits range could be balanced by Yellow's (YELL) exit.
"We would view YELLâs financial pressures as a positive for its peer LTL industry operators given immediate pricing and volume gains and positive leverage. If YELL were to exit the market, we would expect non-union carriers leading in service such as ODFL/SAIA to outperform through profitable share gains as capacity levels flex higher. We would also expect XPO (80% of mix national account) to outpace on diversions from multi-channel shippers given YELLâs high national account mix."
The firm boosted its ratings on Saia (SAIA), Old Dominion Freight Line (ODFL), and XPO(NYSE:XPO) to a Buy rating from Neutral. Separately, Saia (SAIA) was upgraded at Evercore ISI to Outperform from Market Perform.
The trucking sector in general broke higher on Tuesday amid the Yellow bankruptcy buzz. Gainers included TuSimple (TSP) +10.00%, ArcBest Corporation (ARCB) +8.11%, TFI International (TFII) +7.58%, Old Dominion Freight Line (ODFL) +6.70%, Saia (SAIA) +5.77%, XPO (XPO) +5.22%, Daseke (DSKE) +3.88%.and Heartland Express (HTLD) +3.05%.
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Truckload demand stays weak in sign of freight recession 
Old Dominion Freight Line gains after Evercore ISI upgrade
ArcBest stock skids after Bank of America downgrade