XPO reports strong Q2 2019 earnings results

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

Revenue­­-at $4.24 billion-was down 2.7% annually, and net income attributable to common shareholders-at $122 million-was down compared to $132 million a year ago. Operating income-at $258 million-was up 11.7%, and diluted earnings per share-at $1.19-topped $1.03 from a year ago and Wall Street estimates of $1.04.

Adjusted quarterly EBITDA-at $455 million-beat last year’s $437 million, and XPO also upped its 2019 free cash flow to between $575 million to $675 million, an increase over its previous range of $525 million to $625 million, while XPO’s net capital expenditures remain the same at $400 million to $450 million.

XPO Chairman and CEO Brad Jacobs was bullish about the company’s second quarter results.

“We beat on EPS, adjusted EBITDA and free cash flow in the second quarter, offsetting a softer operating environment with cost discipline and margin gains,” he said. “In North American freight brokerage, we improved net revenue margin to 20.4%, up 360 basis points from last year’s second quarter. In North American less-than- truckload, we improved yield by 3.9% and realized a record adjusted operating ratio of 80.3%.”

The company’s top executive added that XPO is implementing innovations in North American LTL to drive the next leg of profit improvement.

“Our workforce productivity tools are returning positive results in 18 pilot service centers ahead of the national roll-out to all 290 LTL centers this year,” he said. “In addition, we’re developing an entire suite of proprietary tools that utilize machine learning for dynamic pricing, route optimization of pickup and delivery, linehaul efficiency and yard management. We’re on track to deliver at least $1 billion of EBITDA in LTL in 2021. Our updated guidance provides more visibility into our outlook on 2019. We’ve increased our free cash flow range by $50 million, and raised the low end of adjusted EBITDA by $25 million, while expecting revenue to remain flat.”

Quarterly performance by segment:

• Total transportation revenue, at $2.75 billion, was down 4.9%, reflecting a reduction in freight brokerage and direct postal injection business from its largest customer, unfavorable foreign currency exchange and lower truckload rates in freight brokerage that were offset partially by North American less-than-truckload (LTL) growth, with yield up 3.9% annually and an 81.8% operating ratio (OR) and an adjusted OR of 80.3%, its best adjusted OR for any quarter in its history, and managed transportation. Operating income-at $243 million-topped last year’s $205 million; and
• Logistics revenue, at $1.53 billion, rose 1.2%, with organic growth up 4.8%. XPO cited food and beverage, consumer packaged goods, and aerospace and healthcare in North America and e-commerce in Europe as the growth drivers for the quarter, which it said was largely offset by unfavorable foreign currency and a reduction in business from its largest customer

Looking to the future, XPO officials said that the company has identified $700 million to $1 billion of potential growth profit opportunity by 2022, with the pool of growth opportunities coming from: XPO Smart workforce productivity; LTL process improvements; contract logistics automation; European logistics margin expansion; global procurement; and further back-office optimization; and a pool of revenue opportunities in the form of: advanced pricing analytics and revenue management opportunities; XPO Connect digital platform; XPO Direct shared distribution network; and European cross-selling to strategic accounts.