Sector Snap: Less-than-truckload carriers fall on downgrade

Analyst Art Hatfield cut shares of YRC Worldwide Inc. to "Underperform" from "Outperform." He said the two-notch rating cut was the result of continued pressure on the company's business amid a weak freight environment.

Also, Hatfield said that surprising first-quarter results from Arkansas Best Corp. on Wednesday show that it is snatching business from YRC the largest company in the sector and Arkansas Best's closest competitor.

Arkansas Best said its first-quarter earnings soared 78 percent as it cut costs and improved efficiency. Its earnings per share were nearly double what Wall Street had expected.

Hatfield lifted shares of Arkansas Best to "Outperform" from "Market Perform."

The stock soared $4.74, or 15.1 percent, to $36.18 in afternoon trading. Shares of Arkansas Best have traded between $17.94 and $44.97 in the past year.

Hatfield said that while the dwindling U.S. economy has hurt the LTL sector as a whole, it has further impacted YRC Worldwide because of "internal struggles at the company."

"The closing of various business units and the write downs associated with them, have disrupted both the financials and fundamentals of YRC Worldwide," Hatfield wrote in a client note.

Less-than-truckload, or LTL, carriers fill their trucks from a variety of sources and might re-sort and redistribute it at a company terminal along their route.

Shares of YRC Worldwide lost 75 cents, or 5.8 percent, to $12.25. The company will report first-quarter results after the bell Thursday.