Bull Of The Day: Yellow (YELL)

·3-min read

Yellow (YELL) is a Zacks Rank #1 (Strong Buy) and sports a B for Value and a C for Growth.  This is logistics play posted a strong quarter and the stock soared as a result. Let’s explore more about this company in this Bull of The Day article.

Description

Yellow Corporation provides comprehensive logistics and less-than-truckload networks in North America with local, regional, national and international. The company offers industry expertise in flexible supply chain solutions, ensuring customers can ship industrial, commercial and retail goods. It is the holding company for a portfolio of LTL brands including Holland, New Penn, Reddaway and YRC Freight, as well as the logistics company HNRY Logistics. Yellow Corporation, formerly known as YRC Worldwide Inc., YELL is based in Overland Park, KN.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For YELL, I see three of the last four quarters were beats of the Zacks Consensus Estimate.  That is great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

The average positive earnings surprise over the course of the last year works out to be 145%. With a miss factored into the average, we know that the beats are very large in size.

Most Recent Quarter

At the time of writing this Bull of the Day article, YELL was soaring.  Shares were trading 45% higher than the previous close as investors loved the results.

The company posted revenue of $1.42 billion when the Wall Street Consensus was calling for $1.38 billion.

EPS came in at $1.15 and that was $0.80 more than the Zacks Consensus Estimate of $0.35.  That translates in to a 228% positive earning surprise.

The company also showed some restraint in lowering the guidance for capital expenditures to be in the range of $250 million to $300 million compared to the previous range of $325 million to $400 million.

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher.  For YELL, I see annual estimates moving higher.

Over the last 60 days, I see a few increases.

The full fiscal year 2022 has moved from $0.59 to $0.71.

Next fiscal year has also increased from $0.86 to $1.06.

Positive movement in earnings estimates like that is why this stock is a Zacks Rank #1 (Strong Buy).

It should be noted that estimate revisions will still be coming in for YELL over the next few days and we should expect to see the consensus move higher.

Valuation

The valuation for YELL is compelling with a 6.6x forward earnings multiple.  The company is a slow grower with only mid single digits sales growth expected for this year.  That said, the company posted year over year sales of more than 8% in the most recent quarter so there could be some sandbagging built into this number. Margins a negative right now, but are headed in the right direction.

A big move after a solid report is good to see for a stock that was trading over $12 at the start of the year.   The stock looks like it might have bottomed out in June and is now making a move back up.  This is a good name to keep on your aggressive growth radar screen.


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