Ecommerce Pushes XPO Logistics to Record Profits

XPO Logistics Inc posted a record quarterly profit yesterday, fueled by e-commerce demand for its contract logistics and “last mile” deliveries to households, along with shipments of consumer goods and a strong truck brokerage market.

The third-largest publicly traded U.S. logistics company also reaffirmed its full-year forecasts for adjusted pre-tax earnings of at least $1.37 billion in 2017 and $1.6 billion in 2018 and its appetite for rapid-fire acquisitions.

“We generated the highest revenue, net income and cash flow of any quarter in our history,” said Chief Executive Officer Brad Jacobs.

XPO is a big player in e-commerce deliveries through its contract logistics and “last-mile” services for heavy goods in North America and Europe.

“All of our customers are saying fasten your seatbelts,” Jacobs said in an interview on Wednesday.

As reported by William B. Cassidy, Senior Editor for JOC, XPO has been preparing for a bull rush in last-mile deliveries, opening eight new last-mile hubs this fall to bring its total number to 53. Jacobs said XPO will at least open two more this year and 85 by the end of 2018.

“We will have a bigger footprint this year going into the busy season,” he said. “We not only have more hubs, we’ve got larger docks in large metropolitan markets.”

XPO also will hire 6,000 temporary workers, 20 percent more than last year, on the strength of the holiday forecast.

E-commerce, however, is no longer just a holiday story. It’s increasingly becoming just “commerce,” as expectations set by online fulfillment spillover from the consumer to commercial and industrial distribution markets.

That has ramifications for all types of logistics and transport operators.

“There’s no doubt our e-commerce customers are our fastest growing customers, with some growing 20 percent or more a year,” Jacobs said.

Jacobs further stated that e-commerce directly affects four of XPO’s diversified lines of business, but indirectly, online sales affect all of them.

Read: Ecommerce Fight for Last Mile Freight Delivery

And all of XPO’s operations saw significant growth in the third quarter when XPO revenue rose 4.9 percent year over year to $3.89 billion. e-commerce not only pushed more business to e-fulfillment, reverse logistics and last-mile logistics divisions, it filled truck trailers, too.

Less-than-truckload shipments per day in North America were up 1.8 percent from the year, ago quarter, and average weight per shipment increased 3.7 percent. That generated a 5.6 percent increase in LTL tonnage at the second-largest stand-alone US LTL trucking operator.

XPO Logistics customer base is also highly diversified. The more than 50,000 customers we serve are in every major industry and touch every part of the economy. Retail and e-commerce account for the largest portion of our revenue at 26%, followed by food and beverage at 14% and industrial manufacturing at 10%.

These are the key factors driving XPO Logistics high growth and returns:

• Solid organic revenue growth supported by numerous tailwinds
• Leadership positions in the fastest growing areas of transportation and logistics
• $1 trillion addressable opportunities, of which we hold less than 1.5% market share
• A strong presence in the high-growth e-commerce sector
• Cutting-edge technology that differentiates each line of business
• Numerous company-specific margin improvement opportunities
• Low maintenance capex requirements
• Organizational track record of creating value through M&A integrations
• World-class operators who are laser-focused on driving results

XPO has used rapid-fire acquisitions to grow from a $175 million truck brokerage company in 2012 to a $14.7 billion behemoth last year.

While Jacobs declined to provide specifics on his M&A strategy, he did say XPO has a war chest of $8 billion to spend in the coming months and has more than a dozen targets identified.

Related: Ecommerce and Outsourcing Fueling Revenue Growth for Third-Party Logistics Providers

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