Zollars says YRC righting its course

After earnings stumbled in the first quarter, YRC Worldwide Inc. has made corrections that executives believe should produce another record financial year for the Overland Park trucking giant.

Bill Zollars, YRC’s chairman and chief executive, made those assurances to investment analysts Tuesday after YRC ended a streak of 14 straight quarters of improved financial results with the 2006 first-quarter report issued a day earlier.

For the three months that ended March 31, YRC’s per-share earnings were 71 cents a share, a 26 percent decline from 96 cents a share during the same quarter last year.

If the U.S. economy continues to roll along at its current pace, YRC is forecasting 2006 earnings between $5.65 and $5.85 a share, which would be a sharp improvement over 2005’s $5.07 a share. The consensus estimate for YRC among analysts for 2006 was $5.16 prior to the company’s latest guidance.

Zollars said Yellow Transportation, YRC’s biggest unit, suffered higher costs during an unexpected business slowdown in February. Also, USF Bestway, one of YRC’s regional carriers, had problems developing more customers in an area once served by USF Dugan, which YRC closed.

Intermodal rail costs and workers’ compensation expenses also exceeded expectations for YRC.

But Zollars considered the first quarter a one-time setback.

“We made the adjustments necessary to get back on track,” he said. “We think we have the answers to these issues, and it gives us confidence going forward.”

Zollars dismissed suggestions that the company was too confident about what to expect in financial performance during the second half of the year.

“We try to give middle-of-the-fairway (earnings) guidance, and that’s what we’ve done,” he said. “Really with a good economy and the trajectory we have in our businesses, there’s no reason we can’t meet our goals.”

The market seemed to agree Tuesday. The stock jumped 7.37 percent in heavy trading, closing at $41.98 a share.

Satish Jindel, president of SJ Consulting Group Inc., said a key in the coming months will be the company’s regional unit, YRC Regional Transportation. YRC’s regional business grew substantially after it acquired USF Corp. last May. Jindel said YRC’s profit margin from its regional unit in the first quarter was well behind Con-Way Inc., the biggest regional trucker.

“How well they perform in the second quarter and the rest of the year is a function of how well the regional unit executes the integration plan,” Jindel said. “They have created opportunities for significant improvements in operating ratios at USF’s carriers.”