NEW YORK – Yellow Roadway Corp. (YELL) Tuesday raised its third-quarter earnings outlook, citing higher prices for its trucking services and better cost controls.
Shares of the Overland Park, Kansas-based trucking company rose 1.8 percent.
Yellow, the largest national trucking company in the United States, said in a statement it now expects earnings of $1.30 to $1.35 a share for the third quarter, compared with its previous outlook of $1.20 to $1.25 a share.
Analysts, on average, expected earnings of $1.25 a share, according to Reuters Estimates.
"Volumes are pretty consistent with what we expected," Bill Zollars, chairman, president and chief executive of Yellow Roadway, told Reuters. "This is a result of a little better pricing environment than we expected and our business units are operating a bit more efficiently -- better cost management."
The trucking sector, like the railroads, has experienced robust volumes this year, supported by the economic expansion and increased imports from Asia.
Analysts said Yellow had factored in a more moderate increase in prices than some of the other less-than-truckload (search) (LTL) companies, or those that combine multiple shipments into one truckload. Given Yellow's size, a slight increase in pricing, such as 50 basis points, could translate into 10 cents for earnings per share, said Jack Waldo, analyst at Stephens who has an "equal weight" rating on Yellow.
"This increase in earns guidance is highly driven by increase in pricing as opposed to better-than-expected tonnage levels," Waldo said. "Yellow is the first piece of good news for these LTLs in a month."
Avondale Partners analyst Jason Seidl agreed that Yellow's news was a positive for the trucking group. He has a "market outperform" rating on the stock.
The Dow Jones Trucking index (search) rose $2.90 to $224.99 while shares of Yellow gained 78 cents to $43.17.
"First we had FedEx (FDX) raise its guidance, now we have Yellow. This tells us the economy is going well and the pricing environment is really strong for the LTL sector," said Seidl, referring to FedEx Corp.'s move to raise its profit outlook two weeks ago, citing strong demand.
Seidl added that most carriers put through a general rate hike around June, earlier than usual, of about 4.9 percent to 6.2 percent.
Zollars declined to describe exactly how much the company has raised prices, but he said the pricing environment has been better across the board.
"The retention of our price increases is really at an all-time high," Zollars added.