XPO’s Q3 results indicate a return to normality

XPO Logistics spin off

Releasing XPO Logistics’ latest Q3 results, CEO, Bradley Jacobs, commented, “Our business rebounded dramatically in the third quarter. Revenue, adjusted EBITDA and free cash flow were all decisively higher than expected. Our growth was broad-based, spanning our service offerings and geographies.” Bearing in mind the state of the North American and European economies it is remarkable that a business of the size and nature of XPO is doing even moderately well.

Admittedly growth was more respectable than exciting. Revenue for the third quarter was $4,221m, up 1.7% compared to the same period in 2019. Operating income was $223m, slightly lower than the $229m seen in Q3 last year.    

The star performer was the ‘Last-mile’ business which Jacobs said had grown by “11% in the quarter, year-over-year, by leveraging North American hubs and XPO Direct network”. Of course, this was driven by demand for e-retail. The wider ‘Logistics’ segment of the business saw higher revenue and operating profits generally, led by consumer demand.

Truck brokerage saw revenue growth of 27%, which represented, according to Jacobs, was an increase of 13% in terms of net revenue per load, something that he ascribed to XPO’s ‘Connect’ technology.

It is worth noting that the core Less-than-truckload business in North America and Europe saw a decline in revenue, despite higher yields and better operational performance. This might suggest the pricing environment is weaker. In addition, some areas of the cost-base may be a problem. Generally, the Transport business saw flat revenue with operating revenue at $208m edging down slightly.

XPO Logistics illustrates that the road freight and contract logistics sectors in North America and Europe are recovering reasonably well. They seem to be benefitting from the transformation of the consumer and retail sector which is a little surprising. Certainly, the performance of a ‘bell-weather’ such as XPO demonstrates that the market is very different from the crisis conditions seen in Q1 and Q2.

Specifically, for XPO Logistics, however, normality may revive the question of whether Bradley Jacobs will now re-start the process of selling-off parts of the business.

Source: Transport Intelligence, November 10, 2020.

Author: Thomas Cullen

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