XPO Logistics, Inc. (XPO) on Q2 2021 Results - Earnings Call Transcript
Operator: Welcome to the XPO Logistics Second Quarter 2021 Earnings Conference Call and Webcast. My name is Rob, and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note, this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of the applicable securities laws, which by their nature involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. Brad Jacobs: Thank you, operator. Good morning, everybody. Thanks for joining our conference call. With me today in Greenwich are David Wyshner, our CFO; Matt Fassler, our Chief Strategy Officer; and Mark Manduca, the Chief Investment Officer, GXO, our planned logistics spin-off. As you saw yesterday, we delivered the highest revenue and adjusted EBITDA in our history. It was the highest company-wide and in each of our Transportation and Logistics segments. We generated over $5 billion of revenue and over $0.5 billion of adjusted EBITDA. It was the third consecutive quarter. We reported record revenue and adjusted EBITDA. Not only did we solidly beat all expectations, we surpassed a great first quarter with an even better second quarter. It gives both our segments a powerful springboard for profitable growth as separate public companies. Customer activity is more than come back from 2020. And we’re executing extremely well across the business. Yesterday, we raised the midpoint of our 2021 EBITDA guidance for the combined company by more than the second quarter beat. And we raised the pro forma EBITDA guidance for both XPO and GXO. Every area of the business is showing strength. In North American LTL, we’re continuing to expand our operating margin primarily through company specific technology initiatives. As a result, our second quarter adjusted operating ratio ex-real estate gains was our best operating ratio yet. In truck brokerage, we’re continuing to outperform the industry. This is due in no small part to the rapid adoption of our XPO Connect digital platform by customers and carriers. Our Logistics segment delivered the second consecutive quarter of double-digit organic revenue growth. David Wyshner: Thank you for those comments, Brad, and good morning, everyone. Today, I’d like to discuss our second quarter results, our balance sheet and liquidity and our updated outlook for 2021. I’ll be presenting most numbers on a status quo pre-spin basis with post-spin breakouts between XPO and GXO where appropriate as we anticipate the completion of this spin-off on Monday. In the second quarter, we generated revenue of $5 billion in adjusted EBITDA of $507 million. The revenue number reflects a year-over-year increase of more than 40%. Adjusted EBITDA nearly tripled compared to our Q2 results last year when COVID was at its worst. And both revenue and adjusted EBITDA are higher than we expected at the beginning of the quarter. Our record adjusted EBITDA reflects strong growth and continued execution across our business. In this case, it’s also useful to compare our results to the second quarter of 2019, which takes COVID out of the base period. On a two-year stack basis, our revenue and our adjusted EBITDA are both up double-digits. Breaking down our 44% year-over-year revenue growth in the quarter, our UK logistics acquisition in January contributed 4 points of growth, foreign exchange contributed 5 points and fuel prices contributed 4 points. Matt Fassler: Thanks, David. I’ll review the second quarter operating results for our Transportation segment and then Mark will cover Logistics. The strength we saw in LTL reflects the backdrop of improving demand, a healthy pricing environment, and importantly, the impact of our own operating initiatives, all of which has significant runway ahead. Our LTL revenue growth accelerated sharply. Mark Manduca: Thanks Matt. As the largest pure play contract logistics company, our scale puts us at the forefront of the burgeoning demand for logistics services. This is due to three secular mega-trends, outsourcing, e-commerce and warehouse automation. These three robust tailwinds continue to drive our double-digit growth, and the runway remains significant with a potential addressable market of $430 billion, of which $300 billion is yet to be outsourced. In the second quarter, we increased Logistics revenue by 34% compared with a year ago, including the two new Nagel acquisition, which contributed $151 million of revenue in the second quarter. Moreover, our year-over-year organic revenue growth rose to 16%, accelerating from 13% in the first quarter. We saw exceptionally strong growth from our customers in e-com, omnichannel retail and consumer technology. From 2016, through the end of the second quarter, we’ve delivered an organic revenue CAGR of over 7%, reflecting the high growth nature of this business. Moving to profit for the quarter. Our adjusted EBITDA of $169 million for Logistics was 104% higher than in the second quarter of last year and 24% higher than in the second quarter of 2019. Our adjusted EBITDA margin increased 310 basis points to 9%. This was an increase of 10 basis points compared to the second quarter of 2019. On the cost side, we continue to do an excellent job, further strengthening our margin expansion by showing cost discipline and implementing our productivity initiatives. And while the labor market remains tight, we’re managing it well due to the pass-through nature of our contracts. In the last three months, we’ve announced the appointment of an experienced and diverse Board of Directors for GXO. Among other initiatives, our new Directors will help us solidify our ESG leadership, which is important not only to GXO, but also add blue-chip customers. At our Investor Day, we highlighted a number of key environmental goals, including a 30% reduction in greenhouse gas emissions by 2030 versus 2019, carbon neutrality by 2040 and LED lights used by at least 80% of our operations by 2025. Looking forward, our pipeline remains very strong at $2 billion of opportunity and is skewed toward high growth consumer verticals. We announced a number of new contract wins in the first quarter. And our momentum with new business wins persisted into the second quarter with the likes of Dixons Carphone, a large technology retailer in the UK and Nike among others. These second quarter wins alone represent annualized revenue of over $300 million in 2022. These contract wins demonstrate how blue-chip customers trust our reliability and value our ability to deliver innovation. And they’re great examples of the tremendous potential for profitable growth we’re seeing in the logistics landscape, across Europe and north America. Based on current exchange rates, the GXO pro forma guidance we provided yesterday for the full year 2021 sets a target revenue range now of $7.5 billion to $7.8 billion, and also raises our adjusted EBITDA range to $605 million to $635 million. We expect this to accelerate our performance going into 2022, resulting in a higher adjusted EBITDA target of $705 million to $740 million on 8% to 12% year-over-year organic revenue growth. As Brad mentioned, this business is growing the top line at multiples of GDP and compounding at double digit EBITDA growth. While at the same time, producing 28% return on invested capital. And all of us are absolutely delighted to start trading on Monday. Now, I will hand back to the operator and we will take your questions. Operator: Thank you. Our first question comes from the line of Amit Mehrotra with Deutsche Bank. Please proceed with your questions. Amit Mehrotra: Thanks, operator. Hi, good morning everybody. Matt, I wanted to ask about the free cash flow guidance, $400 million to $450 million pro forma for the spin. Just seems a little bit low, given what’s implied for free cash flow to EBITDA conversion. Is there just some conservatism there? Can you help us with that walk and just what the right way to think about the conversion is in RemainCo. Thank you. Matt Fassler: So Amit, the foundation of that free cash flow guide is consistent with the numbers that we gave you in the Form 10 supplement that we put out on June 9. We gave you numbers at that point for cash taxes, CapEx, cash interest. And we have reiterations of some of those numbers in the press release that went out the other night. A couple of other numbers to keep in mind to bridge to that, we have the real estate gains associated with LTL. Those are both on the profit line and in the net CapEx line. So you want to eliminate that. To the extent that we raised our EBITDA guidance from June 9, there’s a little bit of incremental cash tax, not enough to change the number in the release, but still something incremental from free cash perspective. And then, obviously, when we’re in revenue growth mode, as we are and have been this year, there’s some working capital drag, and we’re happy to take that as that accompanies the EBITDA growth that we see. And above that, there’s probably a bit of conservatism put into that number. We continue to expect free cash conversion for RemainCo, typical with what you saw for XPO previously, if not slightly north of that over time. Amit Mehrotra: Got it. Okay. That’s helpful. So high 30%-ish range of EBITDA. Brad, if I could ask a little bit more of a bigger picture question for you. So if I look at XPO today on a when issued or ex-distribution basis, it’s implying at $76 per share. That’s like under a 9 times EBITDA. I know it’s a very thin market and not a true representation of maybe what the real value is, when the distribution actually happens. But just a scenario question for you, if XPO were to just absorb the conglomerate discount that the whole company had prior to Monday spin. What further actions are available to you? You have an incredibly attractive brokerage business, I just think you guys have done an amazing job there and it doesn’t really get a lot of attention. Obviously, you have a very attractive last mile business that would be attractive to a lot of other players in the space. And it just also seems that investors, I think, based on my conversations really like or prefer a pure-play LTL company without all the distractions of many other businesses. And so I guess the question is, is there a potential path for XPO to become a pure-play LTL company, it’s RemainCo or the business doesn’t get the valuation that you deem appropriate for the whole company or for the RemainCo. Thank you. Brad Jacobs: Amit, when we were raising our kids, my wife repeatedly tell them the 3Ps, pleasant, polite and patience. And I heard the three-piece like thousands of times over long periods of time. Patience, I don’t think we’re going to get the conglomerate discount. I don’t know about the first week or two of trading. But in terms of the fullness of time, I don’t think we’re going to get the conglomerate discount. I think that investors understand that about 90% of XPO RemainCo’s EBIT is going to be coming from LTL and truck brokerage and investors know where Old Dominion and Saia and Robinson trade in the mid-teens EBITDA multiples. And the market will look at us compared to them and decide what kind of a relationship are multiple should be. So I’m – be patient. We haven’t even launched it. That when issued market has no volume that the index funds, the long only funds can’t trade in it. So let’s see how it trades next week. I’m optimistic. Amit Mehrotra: Okay. Very good. Thank you guys. Good luck with everything. Appreciate it. Brad Jacobs: Thank you. Operator: Our next question is from the line of Chris Wetherbee with Citi. Please proceed with your questions. Chris Wetherbee: Thanks. Good morning, guys. Wanted to touch on LTL and think about sort of the life post in for RemainCo. How do you think about sort of the growth opportunities for LTL specifically? Would seem the transport company is going to have lot of growth potential, particularly from the brokerage side of the house, but how do you think about sort of your approach to the market on LTL. It seems like a growing market above what the sort of broader freight market might be over the course of the next couple of years. Is that something you want to lean into or is this more about margin and sort of profit growth without necessarily that tonnage growth? Brad Jacobs: We are leaning into it. We’re leaning into it, first and foremost, over the two most prominent strategic initiatives. The focus – the first is focused on price and optimizing yields and really doing that primarily through proprietary technology that enhances our pricing algorithms and enables us to get the best price from our customers, while delivering the best volume and to continue to engineer that. Secondly, we’re going at it to optimize efficiency. We’re doing so on the dock. We’re doing so on pickup and delivery. We’re doing sort of linehaul. Those are intense strategic tech efforts that have been delivering results and are going to continue to do so. We have $1 billion EBITDA target – $1 billion or more EBITDA target in 2022. Those are the primary tools for us to get there. Above and beyond that, obviously, to your point, it’s a very attractive space becoming a more central to the consumer sectors, I spoke about earlier. And in fact, the industrial economy has not yet returned to peak. So we think there’s going to be good cyclical tailwinds in addition to our secular initiatives. We feel very good about that industry and our growth opportunity, our profitable growth opportunity within it. Chris Wetherbee: Okay. All right. That’s helpful. And I mean, if I can switch gears over to GXO for a moment. Mark, you talked about the business wins in the quarter. You guys have obviously posted a number of relatively high profile customer acquisitions over the course of the last couple of quarters. And I guess when we think about the pipeline of what’s in store. Do we think what we’re seeing over the course of the last couple of months is indicative of the type of pace of growth that can be sustained over a period of time? Or are we seeing the confluence of what is a very strong freight market, significant disruptions in the supply chain and maybe some of the secular tailwinds all coming together to sort of – post sort of outsized growth. I guess, I just want to get a sense of your confidence level about maintaining this type of sort of customer acquisition rate over the course of the foreseeable future. Matt Fassler: Yes. Great question, Chris. Thank you for that. And so a couple of things. So firstly, we’re very confident about the 8% to 12% that we talked about for next year 2022, in terms of revenue growth guide. Remember, that’s an organic growth number. Remember, it is the mix of two things. It’s the 5% to 8% of new business wins alongside 3% to 4% of growth in existing facilities. And clearly, I would say that we’re seeing strength in both buckets at the moment, obviously given our e-comm exposure, as you referred to. Let me touch on a couple of things in regards to your question about persistence, what we’re seeing on the ground at the moment at the contract level. As a business model, clearly, we’re driving a few things that are different in the market. I really think that we’re going to create the category here at our level. If you think about what we’re seeing, we’re seeing customers demand scale. We’re seeing customers demand bargaining power in terms of regional pools of labor. We’re seeing our customers demand bargaining power in regards to regional pools of real estate as well. And that obviously helps us with our preferred providers. We’re obviously seeing customers talking about our reverse logistics prowess as well, our ESG backbone, our balance sheet, as David mentioned in his comments. And first and foremost, our technology advancements. So this is pervading through all of the contracts that we’re signing at the moment. We’re clearly no longer seeing a market. And this hasn’t been the case for now many years, we’re not seeing a market anymore that prioritizes price. The market has moved on for that, we’ve seen a secular shift taking place. So we’re very confident our long-term guidance, we would view next year as very much a normal year and long labor wins continue as we’ve seen across H1. Chris Wetherbee: Okay. Okay. That’s helpful. I appreciate the color. Thank you very much, guys. Matt Fassler: Thank you. Operator: Our next question comes from the line of Hamzah Mazari with Jefferies. Please proceed with your questions. Ryan Gunning: Hey, good morning. This is actually Ryan Gunning filling in for Hamzah today. Could you just kind of following up on the last question, could you talk about the pathway to getting to double-digit margins in GXO? And do you have like a timeframe for that? Matt Fassler: So in terms of margin expansion, it’s definitely an output of all the good business that we’re writing at the moment. Clearly, we run the business from a return standpoint as any concession business would. But naturally, when you have the tenants that I talked about, particularly in regards to scale, obviously this business, given the fact that we’re writing business in regards to 28% return on invested capital, our cash paybacks of three years, that day one profitability. Business is getting longer and longer as well in regards to our contract value. So logically, all of the things that I answered in Chris’s question would naturally lead to margin expansion in this business. In fact, we’re guiding to margin expansion next year implicitly within our 8 and 12 and 14 and 20 guide in the numbers that we’ve given you today. So that’s about 50 basis points in and of itself within that operational gearing that we’re pointing towards. So margin expansion is a natural output of what this business is offering, primarily given the tenants that I mentioned in Chris’s question. Ryan Gunning: Great. Thank you. And then, just for my follow-up, could you just talk about maybe what you’re seeing, geographically, on the logistics side? I know you mentioned some new contract wins, but maybe like in Europe versus North America relative to expectations. Matt Fassler: Yes. Good question. So couple of things we’ve seen in the last couple of quarters, if you go back over the last quarter, we’ve signed roughly around $2 billion of contract value in one single quarter, and there’s been a really good mix of countries across our 27 countries. If you put that into context, that means we’ve signed around $5 billion worth of contract value over the course of H1. Like I said, we don’t manage this business from a country to country perspective. You’re seeing if anything, a trend right now where one contract is turning into three contracts, one country contract is turning into a multi-contract – multi-country basis. And therefore, we don’t think about it in country terms, so to speak, but the contract mixes that we talked about, if you look across the top 20 in terms of new wins, it’s a very good mix across our two biggest jurisdictions, two-thirds Europe, one-third North America. So all regions are doing well right now, seeing very strong top line growth and also margin expansion. Ryan Gunning: Great. Very helpful. Thank you. Operator: Our next question is from the line of Jason Seidl with Cowen and Company. Please proceed with your question. Jason Seidl: Thank you, operator. Good morning, Brad and team. I’ll start off with the more high level question. Brad, you talked about getting back beyond pre-pandemic levels in your different business lines earlier in the call. I was wondering if you could talk about – I’m assuming that was in totality. Some of the areas that maybe aren’t back and where we can expect them to sort of even add more, as they get back to the pre-pandemic levels, whether it be in the back half of this year or in 2022. Brad Jacobs: Yes. Hi, Jason. We’re back. I mean, customers are back and volumes are there. We just came off of a second quarter, where we had the best OR, any quarter we’ve ever had in our history at 81.1%. We just came off a quarter in our LTL business, where our EBITDA ex-real estate at $253 million is an all time record for any quarter. And we’re outpacing the typical seasonality on revenue on tonnage and on shipments. And then if you look at the truck brokerage side of the house, we just had a phenomenal quarter, year-over-year revenue doubled is up 101% low count was up 38%, net revenue was up 47%. So we’re outperforming the market. We’re taking share. Positive trends are continuing as we came into July. And XPO Connect is on fire. Massive adoption in XPO Connect continued in the second quarter, we had year-over-year carrier usage up 87%. We had customer usage up 99%. So I feel it back. It can only get better from here. Now, we have to watch this little Delta virus thing, see how that affects the world, but for the time being, it’s back, it’s rip-roaring back. Jason Seidl: Okay, fair enough. I’m going to actually dive down a little bit more on the LTL side with my follow-up. You sort of mentioned the seasonality being sort of above normal levels for the quarter. Wanted to sort of see where that started out in the third quarter in terms of the seasonal trends from June to July. And then maybe dive a little bit into the freight network of XPO freight, because it’s interesting. You have two competitors out there, one looking to add nine terminals, open nine new terminals in the back half of the year, another may be looking to potentially scale down an operation that they just purchased because there’s too many terminals they felt. So just curious where you stand right now with your terminal network and how you feel about maybe potential expansion or contraction. Matt Fassler: Jason, it’s Matt. I’ll take both of those. On LTL, this is in July is good. Yield growth is continuing. Revenue per shipment looks very good. Wafer shipment still holding up nicely. In terms of our coverage, we like our coverage. We have 291 terminals. We have good coverage for the U.S., we’re able to do anything our customers need us to do. We’re very happy with the results that we’re delivering. Obviously we continue to aspire for more, hence our target of $1 billion or more of adjusted EBITDA and LTL in 2022. But we feel our network serves us well for a business strategy and for our customers. Jason Seidl: Okay. And just to clarify, on the July trends, would you call that normal seasonality? Matt Fassler: Yes. Jason Seidl: Okay, perfect. I appreciate the time, as always gentlemen nice quarter. Matt Fassler: Thank you. Operator: Our next question comes from the line of Todd Fowler with KeyBanc Capital Markets. Please, proceed with your question. Todd Fowler: Hey, great. Thanks, and good morning. So just on the brokerage side, your net revenue margins have held in relatively well compared to your peers. I’m curious, you kind of what your expectations are for net revenue margins into the back half of the year, and then with the strong volume growth in the quarter, how do you view that as being sticky is a lot of that more transactional business, or would your expectation be that a lot of that business stays with you if the market normalizes. Matt Fassler: Net revenue margins are holding up well. Net – and we really look at net revenue per load or gross margin per load, which was really the key economic metric. And that number was very good for us in the second quarter. And it remains very good for us as we start the third quarter. We spoke with our brokerage people a lot about the market and about our customer position and that business, it’s sticky. Our customer relationships have never been stronger, including our relationships with our key customers, our load count is exceptionally high levels. It’s holding at exceptional high levels and we expect that to be the case through the remainder of this year. We’ve made massive investments as you know. In XPO Connect our digital freight marketplace that’s helping us drive share. Its helping us to optimize price, its helping us drive productivity and that’s really central to our winning business and retaining business. Todd Fowler: Good. Okay. That makes sense, Matt. And then Brad, just for a follow-up when you think about RemainCo post the spin, we just had the GXO Analyst Day. And so there was some clarity and kind of the focus there. What do you see as kind of the main areas for focus for RemainCo after the spin, as we look out into 2022 and beyond? Brad Jacobs: Well, we’re going to build on the leading positions we’ve got in LTL and truck brokerage. We’re going to continue to focus on innovative technologies. From a financial perspective, clearly our number one priority is to deleverage and to meet our target of investment grade rating. We’re going to continue to execute on the LTL side to achieve at least $ billion of adjusted EBITDA next year. And we’re going to continue on truck brokerage to outperform the market primarily due to XPO Connect. So the future looks bright. Todd Fowler: Okay. Got it. So it’s really the focus on the growth in brokerage and margin improvement in LTL. Brad Jacobs: Correct. Todd Fowler: Great. Thanks the time this morning. Brad Jacobs: Thank you. Operator: Our next question comes from the line of Scott Schneeberger with Oppenheimer. Please, proceed with your question. Scott Schneeberger: Thanks. Good morning. Congratulations to David and Ravi. I – Brad or Matt, I’m going to go to you guys first on truck brokerage, very impressive margins and growth. It’s been covered pretty well on the call, but we’ve seen some M&A in the industry recently. And just kind of curious where you think the industry looks a few years from now for the consolidation where XPO plays in that. Thanks. Matt Fassler: Well, there’s definitely been some interesting consolidation recently. I think that’s a good thing and plays right into how we have envisioned the industry to evolve over time. Some of the transactions were at a very healthy multiples and served to validate what assets in this industry are worth and maybe shows that we’re even more undervalued than we thought. In terms of our role in it, our prime goal is to delever, and that’s going to be our most important use of cash, but we don’t rule out M&A. It’s a tool in our tool kit, but it can’t conflict with our goal to delever. Scott Schneeberger: Excellent. Thanks. And following-up, Mark over to you. Curious how should we be tracking XPO Direct or GXO direct – going forward, just a progress report on that, and maybe, I think you have some guidance on where that should be in 2021, but just thinking about 2022 and beyond. Thank you. Mark Manduca: Thanks for the question. So GXO direct continues to be as you say, on track, it’s growing incredibly fast as we talked about in the Investor Day, it’s got roundabout $200 million of revenue at the moment. It’s an important place to grow customers particularly for our longer-term plans of moving them towards dedicated facilities. So it’s a high growth engine for us. It’s a great place to find new customers and work with them going forwards. So it’s an important part of our business, but it’s by no means the major part of our business. We are very much the Cadillac service providing dedicated facilities across our 850 or so warehouses. Scott Schneeberger: Understood. Thanks. Brad Jacobs: Thank you. Operator: Next questions is from the line of Ravi Shanker with Morgan Stanley. Please, proceed with your question. Ravi Shanker: Thanks. Good morning, everyone. Brad, just to follow-up on your last response, so it’s been a while since we got an update on your strategic kind of long-term view of the brokerage business with everything that’s going on in the space. Where do you think that business goes over time kind of what our long-term sustainable growth and net margins like what role do you see the new digital entrance playing kind of do you think the business looks the way it has in the last 10 years – in the next 10 years? Brad Jacobs: I think the difference in distinctions between the digital players and the – whatever you call the non-digital players has become almost non-existent. I think the technology that’s been embraced by C.H. Robinson and some of the other truck brokers, and of course, ourselves, it’s – we’re digital, we’re as digital, more digital than the so-called digital ones. I think over time with respect to margins, I think margins will come down. Having said that, I think profit will go up, because I think volume will go up, because I think the amount of transactions, the velocity transactions is going to increase. I think there’s going – it’s going to evolve very much like you see commodity markets, particularly like the oil market, for example, we’re at more from purely physical markets and then derivative markets and Wall Street got involved. I think the players will be different. And I think the connectivity between shippers and the carriers and the brokers in between will become seamless. I think it will be much more digital and much less human based. I think on the physical truck side, it’s a question of time, when it will be autonomous. I think that autonomous evolution is slowed down a little bit because of the way that the political winds are blowing, where it’s more of a EV focus than an autonomous focus. But the compelling economics of autonomous trucking are extreme. And Adam Smith, hiding hand of capitalism will not allow autonomous trucking to be delayed forever. So – and that’ll take cost out, it take a huge amount of cost out since the costs coming out in the actual brokerage side, you’ll see costs coming out on the purchase transportation side. And it’ll be just to be more efficient and brokerages who are like ourselves, who are all in on technology will have a great role to play there. And – but margin should come down with volumes going up, therefore profit going up. Ravi Shanker: That’s very, very helpful color. Thanks for that, Brad. And maybe as a follow-up either to you or for Matt, you guys have given us 2022 guidance on the GXO side, which is really helpful. How do we think about that on the XPO side kind of just maybe your views on how long the cycle it would last and also maybe idiosyncratically irrespective of the cycle, how much margin growth can you drive there? Matt Fassler: We’re likely to give you guidance for XPO RemainCo at the end of the year, as we typically would. And to your point, there are – there is more cyclicality, there’s economic cyclicality, but more so a truck cycle cyclicality and other things related to that. I think best time to give guidance for this business is going to be at your end. Obviously GXO has fantastic visibility to its business based on the contractual nature of that business. And they’ve given you 2021 guidance, 2022 guidance, 2021 revenue guidance and 2022 organic revenue guidance, so obviously a tremendous basis for evaluating that business as well. Ravi Shanker: Understood. Thanks, Matt. Operator: Thank you. Our next question is from the line of Stephanie Moore with Truist. Please, proceed with your questions. Stephanie Moore: Hi, good morning. Thank you for the question. I wanted to touch on RemainCo or XPO’s technology investment strategy as we look to – the remainder of this year and next year, I think GXO was a little bit more apparent and kind of broken out during the Analyst Day and then move towards automation, robotics, but I’d love to hear what RemainCo kind of has planned as it historically has also been a pretty large investor behind new technology. So any color there would be helpful. Thank you. Matt Fassler: Stephanie, that’s right. And we’re going to continue to be. So obviously XPO Connect is our primary technology platform in brokerage. It’s our digital freight marketplace. How it’s helped drive our success in brokerage over the past number of quarters is going to continue to do so. It’s less about $1 investment there. We’ve booked a lot of $1 investment there. But its not – but enhancing that, that technology and we’re on path to do that. We continue to rollout XPO Smart within LTL to optimize the labor on the dock date. It’s rolled out, but continued to harvest the benefits of XPO Smart, and there’s the opportunity to continue to enhance that platform as well. And then finally, within LTL, as I mentioned in my prepared remarks, we’re very focused on enhancing our pricing algorithms. We’re really just beginning to pierce the surface. There’s an awful lot of enhancement opportunity for us there. And then our route optimization efforts and P&D and linehaul, I have very high potential. Those are the highest priority technology investments for us here in makeup. Stephanie Moore: Great. Thank you so much. Brad Jacobs: Okay. And that concludes our earnings call. We’re very happy that we reported such a strong quarter and we raised the outlook for both XPO and GXO. And I want to take this opportunity to give a big thanks to all the employees around the country and around Europe and around Asia. We’ve worked so hard over the last eight or nine months to create two industry powerhouses launching next week. So thank you all. Talk to you soon. Operator: This concludes today’s call. Thank you for your participation. You may now disconnect your lines at this time.XPO Ratings Summary
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XPO Logistics: A Comprehensive Financial Analysis
- Earnings per share (EPS) of $0.792 fell short of the estimated $0.89, indicating a miss in earnings expectations.
- Revenue of $2.053 billion surpassed the estimated $2.020 billion, showcasing higher-than-anticipated revenue generation.
- Significant financial metrics include a price-to-earnings (P/E) ratio of 37.7 and a debt-to-equity ratio of 2.53, reflecting investor confidence and significant use of debt.
XPO, listed on the New York Stock Exchange as NYSE:XPO, is a prominent player in the logistics and transportation sector. The company provides supply chain solutions, including freight transportation and last-mile delivery services. XPO competes with other logistics giants like FedEx and UPS, striving to maintain its position in a highly competitive market.
On October 30, 2024, XPO reported earnings per share (EPS) of $0.792, which fell short of the estimated $0.89. Despite this, the company's revenue for the period was $2.053 billion, surpassing the estimated $2.020 billion. This indicates that while earnings were below expectations, XPO managed to generate higher-than-anticipated revenue.
XPO's financial results for the third quarter of 2024 show a positive trend. The company reported diluted earnings from continuing operations per share of $0.79, up from $0.72 in the same period of 2023. Additionally, adjusted diluted earnings from continuing operations per share increased to $1.02, compared to $0.88 in the previous year, highlighting growth in earnings.
The company's financial metrics provide further insight into its performance. XPO has a price-to-earnings (P/E) ratio of 37.7, indicating investor confidence in its earnings potential. The price-to-sales ratio of 1.73 suggests the market values its sales at 1.73 times its revenue. The enterprise value to sales ratio is 2.20, reflecting the company's total valuation compared to its sales.
XPO's financial health is also evident in its enterprise value to operating cash flow ratio of 20.46, showing how its valuation compares to cash flow from operations. With an earnings yield of 2.65%, XPO offers a return of 2.65% on its earnings relative to its share price. The debt-to-equity ratio of 2.53 indicates significant use of debt, while a current ratio of 1.06 suggests the company can cover its short-term obligations.
XPO Logistics: A Comprehensive Financial Analysis
- Earnings per share (EPS) of $0.792 fell short of the estimated $0.89, indicating a miss in earnings expectations.
- Revenue of $2.053 billion surpassed the estimated $2.020 billion, showcasing higher-than-anticipated revenue generation.
- Significant financial metrics include a price-to-earnings (P/E) ratio of 37.7 and a debt-to-equity ratio of 2.53, reflecting investor confidence and significant use of debt.
XPO, listed on the New York Stock Exchange as NYSE:XPO, is a prominent player in the logistics and transportation sector. The company provides supply chain solutions, including freight transportation and last-mile delivery services. XPO competes with other logistics giants like FedEx and UPS, striving to maintain its position in a highly competitive market.
On October 30, 2024, XPO reported earnings per share (EPS) of $0.792, which fell short of the estimated $0.89. Despite this, the company's revenue for the period was $2.053 billion, surpassing the estimated $2.020 billion. This indicates that while earnings were below expectations, XPO managed to generate higher-than-anticipated revenue.
XPO's financial results for the third quarter of 2024 show a positive trend. The company reported diluted earnings from continuing operations per share of $0.79, up from $0.72 in the same period of 2023. Additionally, adjusted diluted earnings from continuing operations per share increased to $1.02, compared to $0.88 in the previous year, highlighting growth in earnings.
The company's financial metrics provide further insight into its performance. XPO has a price-to-earnings (P/E) ratio of 37.7, indicating investor confidence in its earnings potential. The price-to-sales ratio of 1.73 suggests the market values its sales at 1.73 times its revenue. The enterprise value to sales ratio is 2.20, reflecting the company's total valuation compared to its sales.
XPO's financial health is also evident in its enterprise value to operating cash flow ratio of 20.46, showing how its valuation compares to cash flow from operations. With an earnings yield of 2.65%, XPO offers a return of 2.65% on its earnings relative to its share price. The debt-to-equity ratio of 2.53 indicates significant use of debt, while a current ratio of 1.06 suggests the company can cover its short-term obligations.
TD Cowen Lowers XPO Price Target to $142, Maintains Buy Rating Amid Softer Industrial Economy
TD Cowen analysts revised their price target for XPO (NYSE:XPO) to $142, down from $143, while maintaining a Buy rating on the stock.
The revision comes after the firm adjusted its model to reflect quarter-to-date performance. August's tonnage per day showed a 4.6% decline, which fell short of seasonal expectations due to XPO's significant exposure to the weakened industrial economy. As a result, the analysts lowered volume assumptions for the second half of the year.
Despite the volume adjustments, the analysts remain confident in the company's ability to maintain yield and margin targets, citing the effectiveness of XPO’s cost and yield optimization efforts. Based on an estimated $5.80 in earnings per share for 2026, and maintaining a 24.5x valuation multiple, the new price target is set at $142.
TD Cowen Lowers XPO Price Target to $142, Maintains Buy Rating Amid Softer Industrial Economy
TD Cowen analysts revised their price target for XPO (NYSE:XPO) to $142, down from $143, while maintaining a Buy rating on the stock.
The revision comes after the firm adjusted its model to reflect quarter-to-date performance. August's tonnage per day showed a 4.6% decline, which fell short of seasonal expectations due to XPO's significant exposure to the weakened industrial economy. As a result, the analysts lowered volume assumptions for the second half of the year.
Despite the volume adjustments, the analysts remain confident in the company's ability to maintain yield and margin targets, citing the effectiveness of XPO’s cost and yield optimization efforts. Based on an estimated $5.80 in earnings per share for 2026, and maintaining a 24.5x valuation multiple, the new price target is set at $142.
XPO Logistics Gains 10% on Q1 Beat
XPO Logistics (NYSE:XPO) saw a surge of over 10% in its shares intra-day today, driven by a better-than-expected Q1 earnings report. The company reported earnings per share (EPS) of $0.81, outperforming the consensus estimate of $0.67. Revenue reached $2.02 billion, surpassing the estimated $2.01 billion.
The company's adjusted EBITDA margin increased to 20.9%, compared to 16.3% in the same period last year. CEO Mario Harik highlighted that the strong Q1 financial results exceeded expectations, providing a solid foundation for 2024. XPO Logistics achieved year-over-year growth of 6% in revenue, 37% in adjusted EBITDA, and 45% in adjusted diluted EPS.
Harik noted that while the company has made significant progress in implementing its LTL 2.0 plan, it is still in the early stages of realizing its full potential.
XPO Logistics Gains 10% on Q1 Beat
XPO Logistics (NYSE:XPO) saw a surge of over 10% in its shares intra-day today, driven by a better-than-expected Q1 earnings report. The company reported earnings per share (EPS) of $0.81, outperforming the consensus estimate of $0.67. Revenue reached $2.02 billion, surpassing the estimated $2.01 billion.
The company's adjusted EBITDA margin increased to 20.9%, compared to 16.3% in the same period last year. CEO Mario Harik highlighted that the strong Q1 financial results exceeded expectations, providing a solid foundation for 2024. XPO Logistics achieved year-over-year growth of 6% in revenue, 37% in adjusted EBITDA, and 45% in adjusted diluted EPS.
Harik noted that while the company has made significant progress in implementing its LTL 2.0 plan, it is still in the early stages of realizing its full potential.
XPO Price Target Raised at Wolfe Research
Wolfe Research analysts raised their price target for XPO (NYSE:XPO) from $87 per share to $105 while maintaining an Outperform rating on the stock.
The analysts’ assessment of the transportation sector in the third quarter suggested an improving risk/reward scenario for transport stocks. They pointed out early indications of a potential bottoming in freight demand, citing recent improvements in West Coast import volumes, as well as rail intermodal and carload volumes.
However, they acknowledged that TL (Truckload) spot rates remain close to historical lows, and the firm anticipates ongoing pressure on contractual pricing and overall yield growth. Consequently, Wolfe Research believes there is continued earnings per share (EPS) risk across the industry in the third quarter, with even greater potential risk to the Street's fourth-quarter estimates.
Regarding XPO, the analysts expressed confidence in its "significant turnaround potential" and highlighted the possibility of substantial margin improvement and stock price upside from its current levels.
