Auszug aus Meldung...Buy YRC Worldwide Based On Improving FundamentalsImproving fundamentals? On the surface this title sounds ludicrous. YRC Worldwide (YRCW) has $1.3 billion in long-term debt, it pays $151 million in annual interest expense, and it has significant pension obligations. However, the facts don't lie and the facts are that trends in operating income and gross margins are improving dramatically. While YRCW hasn't really participated in the rally this year, I stand by my belief that this could potentially be one of the best performers in the market over the next couple of years as the economy continues to gradually improve and as management maintains its focus on improving ontime deliveries and removing unnecessary expenses from its network. The turnaround going on with YRCW is similar in many ways to recent turnarounds at Sirius (SIRI), Nexstar Broadcasting (NXST), Hovnanian (HOV) as well as the turnaround at Foster Wheeler (FWLT) back in 2004, all of which provided investors with astronomical returns. Every one of these companies had huge debt loads and negative equity right when the stock began rallying hard. As you can see above, assuming a 3.0% revenue growth rate and 66.6% margins, net income would be $44 million. If margins stayed at the upper range of 2012 numbers then it would yield $91.4 million in net income. Assuming fully diluted shares of 8 million would result in EPS of $5.50 on the low end and $11.43 on the high end. This gives you a sense of just how much operating leverage this company has. An improvement of just 0.6% in sales increases EPS by over 60%. The above also gives you an idea of just how close this company is to experiencing exploding net income and EPS numbers. Ahhh…but what about Share Dilution? As always with any potential turnaround company, you have to consider any potential share dilutions going forward. Most turnaround companies have some sort of convertible bond issuance from their dark past that scares investors away. This is no different with YRCW. YRCW currently has a share count of roughly 7.8 million shares. There are two convertible notes: (1) the series B notes are convertible at $14.5 (roughly 7 million shares), and (2) the series A notes are convertible at $34 (roughly 6 million shares). Assuming the stock does manage to get to $14.50 per share, the diluted share count would grow to 14.8 million shares. This would roughly cut in half the projections above. So on the low end with 2.4% growth and 66.6% gross margins, you would see EPS of about $1.60. If revenues grew 3.0% and margins averaged 67.5%, then diluted EPS would be $6.20. Now let's assume the stock gets as high as $34 and the series A notes are converted. This would bring total share count to 19.8 million and would drop EPS down to $1.24 on the low end and $4.62 on the high end. The company's stock currently trades at 5.4 times the low end and 1.45 times the higher end (i.e., 3% growth and 67.5% margins). One thing that is not included in this calculation, though, under the assumption that both share conversions kick in, is the reduced interest expense as a result of the debt associated with those convertible notes going away. If both notes convert, then this would reduce annual interest expense by roughly $24 million (or $1.21 EPS fully based on fully diluted shares of 19.8 million). If you add those to the above estimates, you would get a range of $2.45 to $5.83 EPS. And keep in mind that if the company can hit these levels of profitability, they will be in a very good position to renegotiate their loans and significantly reduce the interest expense they pay on their remaining debt, which would again help EPS figures. For example, a 10% reduction in the remaining annual interest expense (excluding interest on convertible notes) would yield $13 million in cost savings which on a fully diluted share count would result in another $0.67 in EPS. http://seekingalpha.com/article/...mproving-fundamentals?source=yahoo
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