XPO delivers solid earnings results

Greenwich, Conn.-based XPO Logistics, a provider of global freight transportation and logistics services, reported solid third quarter earnings today.

Revenue­­-at $4.15 billion-was down 4.4% annually, and net income attributable to common shareholders-at $117 million-was up 13.7% compared to $101 million a year ago. Operating income-at $229 million-was up 8.7%, and diluted earnings per share-at $1.14-topped Wall Street estimates of $1.03 per share.

Adjusted quarterly EBITDA-at $438 million-beat last year’s $415 million, with full-year adjusted EBITDA remaining between $1.675 billion and $1.725 billion. And XPO also generated $278 million of free cash flow from operations and $257 million of free cash flow, with year free cash flow remaining unchanged at $575 million to $675 million, and net capital expenditures also unchanged, in the range of $400 million to $450 million.

“In the third quarter, we grew EPS by 54% and adjusted EPS by 33% year-over-year,” said XPO Chairman and CEO Brad Jacobs in a statement. “We also delivered a solid beat on adjusted EBITDA, outpacing the macro through cost control and margin discipline. In less-than- truckload, our adjusted operating ratio was a third quarter record. We remain firmly on track to generate at least $1 billion of EBITDA from LTL in 2021. Our significant investments in technology are creating tailwinds across our operations. We’re executing on 10 initiatives that represent a pool of $700 million to $1 billion of potential profit improvement over the next several years. One large opportunity is to apply our XPO Smart productivity tools to the $5 billion of annual costs related to our variable labor spend. All 10 initiatives are specific to XPO and largely independent of the operating environment. We’re very focused on the size of the prize and the meaningful potential uplift to our profitability.”

Quarterly performance by segment:

• Total transportation revenue, at $2.68 billion, was down 6%, reflecting a reduction in freight brokerage and direct postal injection business from its largest customer, unfavorable foreign currency exchange and lower rates in truck brokerage and unfavorable foreign currency exchange that was partially offset by growth in managed transportation. Operating income, at $208 million, was up 5.8%. North American LTL yield, excluding fuel, headed up 2.9%, with the LTL operating ratio at 82.3%; and
• Logistics revenue, at $1.51 billion, was off slightly compared to last year’s $1.52 billion, with organic revenue growth up 2.4%. XPO said this growth was paced by consumer packaged goods, food and beverage, and aerospace in North America, e-commerce in Europe, which was largely offset by a reduction in business from its largest customer. Quarterly operating income, at $61 million, was ahead of last year’s $59 million, and adjusted EBITDA, at $142 million, topped $128 million a year ago, which XPO said reflects growth from existing customers and new business in recent quarters that was offset by a reduction in business from its largest customer and unfavorable foreign currency exchange

XPO’s Jacobs said on the company’s earnings call this morning that the company’s main lines of business produced important gains in the third quarter, with the 11% EBITDA gain on the logistics side, as well as being able to buy truckload capacity at better than market rates, which led to a 22% revenue gain for its managed transportation business.

Addressing the company’s LTL business, Jacobs said XPO LTL is firmly on track to deliver at least $1 billion in EBITDA in 2021, adding that LTL adjusted operating ratio was its best ever for the third quarter.

Jacobs also lauded the company’s technology and innovation initiatives, noting that its proprietary technologies are continuing to drive benefits for its customers and shareholders, with the entire management team highly focused on executing on ten major levers to significantly improve profits over the next several years.