XPO Logistics reports solid Q4 and 2019 earnings results

XPO Logistics, a Greenwich, Conn.-based provider of global freight transportation and logistics services, reported strong fourth quarter and full-year 2019 earnings earlier today.

Fourth quarter revenue—at $4.14 billion—was off 6% annually, but net income attributable to common shareholders—at $96 million—was up 14%. Adjusted EBITDA for the quarter headed up to $432 million, for a 14% increase, and XPO generated cash flow from operations, of $349 million, for a 38% annual decline, as well as $349 million of cash flow from operations and $221 million of free cash flow, which was down 54%. Adjusted earnings per share—at $1.12—were up 56% annually and topped Wall Street expectations of $1.08.

Full-year 2019 revenue was off 3.7% to $16.65 billion, and organic revenue growth saw a 9.3% annual gain, with earnings per share, at $3.47, ahead of 2018’s $2.88. Adjusted EBITDA for 2019, at $1.67 billion, was up 7%.

“We delivered a good fourth quarter and a good year,” said XPO Chairman and CEO Brad Jacobs in a statement. “I’m particularly pleased that we grew fourth quarter EPS by 50% year-over-year, and adjusted EPS by 56%. We also increased net income by 18% and adjusted EBITDA by 14% in the quarter. In our less-than-truckload unit, where we have several new technologies in place, the operating ratio was 83.9%, and the adjusted operating ratio was a fourth quarter record at 82.3%. In truck brokerage, we increased volume year-over-year [by 19% when excluding volume from XPO’s largest customer and exceeded its goal of 100,000 driver downloads in December] with lower headcount [by nearly 20%], propelled by our XPO Connect digital platform. Our technology also helped our logistics segment generate a double-digit adjusted EBITDA margin in the quarter for the first time since 2015.”

Quarterly performance by segment:

• Total transportation revenue, at $2.6 billion, was down 8%, with XPO noting that the reduction mainly was due to a decrease in freight brokerage and direct postal injection from its largest customer, lower truck brokerage rates, and unfavorable currency exchange, which were partially offset by last mile revenue growth and higher truck brokerage volumes. Operating income, at $173 million, was up 38.8%; and
• Logistics revenue, at $1.56 billion, was essentially flat with last year’s $1.59 billion, with XPO pointing to a reduction in business from its largest customer offset by revenue growth in consumer packaged goods, aerospace, and food and beverage verticals in North America, and in e-commerce and chemicals in Europe

On the company’s earnings call this morning, XPO’s Jacobs said that the company achieved good fourth quarter and full-year 2019 results, despite what he called a choppy macroeconomic environment.

“We remain disciplined on cost and pricing, and we continue to reap the benefits of our tech initiatives,” he said. “For 2020, we expect organic revenue growth of 3%-to-5%, adjusted EBITDA growth of 7%-to-10%, and robust free cash flow in the range of $600 million-to-$700 million.”

Jacobs also touched upon the January 15 announcement made by XPO, regarding the sale, or spin-off, of some of its business units, with the exception of its North American LTL unit.

“This process is consistent with our long-held priority of maximizing shareholder value,” he said. “We are proud of the outsized returns we have already delivered for our shareholders, and we continue to trade at a significant discount, to the sum of our parts…to the valuation of our pure play peers. The process is off to an excellent start, but we have no update to share with you on this call.”

CFO appointment

XPO announced yesterday that David Wyshner has been named as Chief Financial Officer, effective March 2. XPO said Wyshner’s 28-year career includes 13 years as CFO of multi-billion-dollar public companies that completed major asset sales, spin-offs and acquisitions during his tenure. Prior to joining XPO, he served as CFO of Wyndham Hotels & Resorts, Inc. Sarah Glickman, who assumed the role of acting chief financial officer on August 15, 2018, will serve in a new role as senior vice president, corporate finance and transformation.