YRCW vor charttechnischem Turnaround

A few months ago I wrote an article on YRC Worldwide's (YRCW)  future as a company. Since then, the stock has more than tripled and  gained a large amount of momentum with multiple upgrades by various  banks as well as had interesting positions taken up by large funds. With  earnings around the corner, I wanted to update individuals on what has  happened to YRC Worldwide in recent weeks and clarify why it has  garnered so much momentum as well as take a look at some aspects of the  company, industry, and stock that have gone unnoticed amid recent  unexplained volatility.

Careful Who You Listen To

In  Recent days, it is evident that the short interest on YRCW has grown  dramatically. With earnings around the corner on July 29, this once  neglected position is gaining volume. With its growing volume and  volatility a number of false rumors have spurred through the financial  ecosystem. Many of these rumors, which range from claims of immediate  share dilutions to individuals claiming they've seen YRCW's profits  ahead of time, have been rooted in completely false facts and have been  derived from comments and financial message boards. Interestingly  enough, these rumors, in unison with technical short selling and the  liquidation of positions, have resulted in the stock price contracting  significantly in the last two trading sessions. That being said, it  could potentially be a good buying opportunity for interested investors.  However, the question everyone is wondering is what the future of the  company will turn out to be in the short term, especially with regards  to its second-quarter earnings. The following paragraphs will shed light  on the following quarter and discuss the direction it is likely to go  in.

Q2 Earnings For YRC Worldwide

As I did  in my last report on YRC Worldwide I have examined the ATA (American  Trucking Association) tonnage index to get a better idea of how YRC  Worldwide will perform in the next quarter. Interestingly enough, both  April and May have had the highest growth in year-over-year gain since  December of 2011. In the overall month of April the trucking tonnage  index was 4.3% higher than last year and in the month of May it jumped a  shocking 6.7%. This drastic rise in the amount of matter shipped  nationwide will reflect well on various trucking companies across the  board. The ATA Chief Economist Bob Costello even stated,

"While we  heard good reports regarding Freight levels during May, I have to admit  I am a little surprised at the large gain in tonnage... After bouncing  around in a fairly tight band during the previous three months, tonnage  skyrocketed in May."

The ATA compiles its monthly index by  surveying its carrier members on the amount of tonnage they've hauled  within each month of the year. Subsequently this increase in the tonnage  index could easily push YRC's overall revenue up in its Q2 earnings  report. As a testament to this notion are the recent earnings released  by the trucking company, J.B. Hunt Transport Services, Inc. (JBHT),  which posted its earnings on the 16th and had a 10.2% growth in  year-over-year revenue in its second-quarter earnings. If YRC Worldwide  releases even a "decent" revenue increase it will easily soar into the  mid $40s and higher and if it were to get numbers anywhere near those  produced by JBHT (such as a 10% revenue increase) then the company is  likely to grow anywhere between 50-125%.

What This Means For Shareholders and Risk/Benefit Analysis

From  a logical standpoint individuals with Calls/Puts and or Short positions  in YRC Worldwide should beware in the coming weeks when utilizing  technicals to cast short-term positions. The reasoning for this is the  high and inexplicable volatility as well as the risk of increased major  buy-ins by heavyweight bulls such as billionaire Marc Lasry's Avenue  Capital, which just converted shares at a 34$ price target and other  billion dollar hedge funds who already have long positions such as  Prescott Group Capital Management, Jim Simons's Renaissance  Technologies, Jeffrey Altman's Owl Creek Asset Management, and finally  the Carlyle Group.

Many of these Funds are in YRC Worldwide for  the long term and regardless of the next quarter's performance many of  them do not intend to shed their positions. With that in mind, i  forecast that the potential downside of bad earnings to be anywhere from  25-55% and the potential upside of positive earnings to be anywhere  from a 50-125% increase in share value. Because of the volatile nature  of such a position a recomended and strategic maneuver upon and or  directly preceding the next earnings would be to buy august calls at  around 20$, 25$, 30$ and 35$ strike prices due to the stock's overtly  volatile nature.

Conclusion

It is apparent  to anyone in private equity that YRC Worldwide is going through a  considerable turnaround. The company's dedicated CEO James Welsh, raised  confidence levels at the Wolfe Conference and outlined an ambitious  future for the company in the years ahead. In addition, the company has  already received considerable upgrades to outperforms and Buys by  various financial organizations such as Zacks, UBS AG, BB&T Corp,  Standpoint Research, etc. The majority of these upgrades recommend the  stock for long-term positions, which can only be seen as reassuring.  Ultimately, YRCW's Q2 revenues, should have the "winds at its back"  being as it may that the overall tonnage index has grown so dramatically  in recent months. All that being said, unless the trucking tonnage  index has dropped dramatically in one of its consistently successful  months (June) an increase in YRCW's Q2 revenues seems to be a very  likely scenario.

Additional disclosure: I have Calls on YRCW