Orange County Register: Trucking business up for grabs as Yellow’s collapse shakes industry

By Thomas Black | Bloomberg

Yellow Corp., one of the leading players in short-haul trucking in the US, is on the brink of disappearing from the industry. This creates a massive opportunity for other companies in the weakened freight market to capture billions of dollars in business.

With Yellow Corp. ceasing operations and planning to file for bankruptcy, major players like FedEx Corp. and Old Dominion Freight Line Inc. are in competition to seize the available freight. This reduction in capacity may lead carriers to increase prices, benefiting those who are still operating, according to Deutsche Bank analyst Amit Mehrotra.

Mehrotra stated, “This development is clearly very positive for the companies that remain open for business.”

The downfall of Yellow Corp. highlights a significant decline in the US freight market following the pandemic. Changes in consumer behavior negatively impacted e-commerce shipments, while industrial production declined for the second consecutive month in June. Nonetheless, industry leaders and analysts emphasize that Yellow Corp.’s struggles are primarily due to preexisting issues rather than industry dynamics.

The Nashville-based company, which acquired several short-haul trucking firms over the years, has been burdened with substantial debt, including over $1 billion that will mature in 2024. In 2020, the US Department of Treasury provided a $700 million loan to bail out Yellow Corp. during the pandemic. The company has also experienced conflicts with its union, as the Teamsters recently threatened to strike over missed employee benefits payment.

According to a statement from the International Brotherhood of Teamsters on Monday, Yellow notified union officials about the bankruptcy plans after ceasing operations, jeopardizing the employment of 30,000 individuals, of which 22,000 are union workers. Yellow Corp. did not respond to multiple requests for comment.

Yellow Corp.’s shares nearly doubled in value at 2:50 p.m. during a volatile trading session on Monday, giving it a market value of approximately $72 million. The company generated $5.2 billion in revenue last year.

Specializing in less-than-truckload service, Yellow Corp. combines multiple smaller shipments onto one truck for short-haul deliveries, which distinguishes it from long-haul trucking and the parcel industry that handles individual packages. Several analysts anticipate that this disruption will benefit other less-than-truckload companies, potentially leading to increased volume and pricing. UBS analyst Thomas Wadewitz stated in a note that this, in turn, may support stock prices for companies like Saia Inc.

Bloomberg Intelligence transportation and logistics analyst Lee Klaskow mentioned that Old Dominion and XPO Inc. could potentially gain from picking up some of Yellow Corp.’s shipments.

Melanie Burnham, the Chief Financial Officer of competitor Hercules, suggests that the impact of Yellow Corp.’s shutdown would have been more significant for shippers if it had occurred two years ago when trucking capacity was limited. However, she believes that now there are strong companies capable of meeting the shippers’ needs.

According to Morprop Advisors, a transportation real estate consultancy, Yellow Corp. operates around 300 cargo terminals, half of which are owned by the company. Over the years, Yellow Corp. has sold some of its terminals to competitors, and currently, half of its existing facilities are older and occupy 10 acres of land or less, making them small in size.

The note from Morprop Advisors mentioned, “Unlike two decades ago, there is now a much more robust investor market for truck terminals.” However, it added that finding buyers has been more challenging in 2023 compared to 2022. Nevertheless, a bankruptcy auction of this magnitude would be hard for them to overlook.