XPO posts strong Q3 earnings ahead of brokerage spin-off

Third quarter earnings for Greenwich, Conn.-based XPO Logistics were very strong, according to results issued earlier today.

Quarterly revenue—at $3.04 billion—was down 7% annually but was up 3% when excluding third quarter 2021 revenue from its intermodal business, which was sold in March 2022. Operating income—at $185 million—was up 39.5%. Adjusted EBITDA, the measure of its profit, was $350 million, the most for any third quarter in company history and beating analyst estimates of $340 million while also marking the ninth straight quarter XPO has delivered a quarterly record for adjusted EBITDA and 10th straight quarter it has topped analyst estimates. Adjusted diluted earnings per share—at $1.45—topped Wall Street estimates, at $1.33.  

These quarterly earnings mark the last time they will include results for the company’s truck brokerage and asset-light transportation units, with those units being formally rolled into a separate company, entitled RXO, which will make its formal debut on November 1.

Quarterly XPO Logistics performance metrics:

• North American less-than-truckload (LTL) revenue, at $1.204 billion—was up 12%, with pounds per day, shipments per day, and average weight per shipment, down 2.9%, 1.8%, and 1.2%, respectively. Gross revenue per shipment, gross revenue per hundredweight (including fuel surcharges), and gross revenue per hundredweight (excluding fuel surcharges), were up 15.0%, 16.4%, and 7.0%, respectively; and
• Brokerage and Other Services revenue—at $1.921 billion—fell 15%

For all of 2022, XPO said that it expects North American full-year adjusted LTL EBITDA to come in at least $1 billion, which includes gains on real estate sales of up to $50 million in the fourth quarter, and annual adjusted operating ratio gains of 50-to-100 basis points, including at least 120 basis points improvement in the fourth quarter, excluding gains on real estate sales.

“Our record results in the third quarter demonstrate how strongly our North American businesses are positioned for growth as standalone companies,” said XPO Chairman and CEO Brad Jacobs in a statement. “Both LTL and truck brokerage outperformed on key metrics leading into tomorrow’s spin-off, and will thrive under the leadership of Mario Harik as CEO of XPO, and Drew Wilkerson as CEO of RXO. Our plan for LTL 2.0 is showing tangible results. We reported third quarter LTL records for revenue and adjusted EBITDA. Our year-over-year tonnage accelerated every month through the quarter and inflected positive in September, with more improvement in October. Importantly, our third quarter tonnage trend outperformed typical seasonality, bucking industry trends. Our truck brokerage business achieved a gross profit margin of 19% in the third quarter, with gross profit dollars up dramatically year-over-year by 31%. We grew volume by 9%, decisively outpacing the industry.”

An XPO spokesperson told LM that, for LTL, XPO is clearly outperforming its peers and gaining market share, while registering a company record for new LTL business wins in the quarter.

“Our revenue was $1.2 billion, up 12% year over year,” she said. “Our third-quarter adjusted EBITDA was $258 million, up 19% year-over-year ex-real estate, in a quarter where we had no real estate gains. Our tonnage trends accelerated from Q2 while peers’ trends decelerated. Specifically, our tonnage trend improved each month during the quarter, turned positive in September and improved further in October. Our yield ex-fuel increased by 7%. Our adjusted operating ratio, a key measure of margin in LTL, was 82.8% a year-over-year improvement of 1.6%. We remain on target to generate at least $1 billion of adjusted EBITDA in LTL in 2022.”

On the truck brokerage side, she said it was another good quarter in truck brokerage, as XPO continues to sharply outperform the industry.

“Our year-over-year load count was up 9%, and we had a record number of loads during the quarter,” she said. “Our gross profit dollars were up 31%, with a gross profit margin for the quarter of 19%, up year over year by 4.9%. Once again, this was driven largely by our investments in technology, namely our XPO Connect digital truck brokerage platform, which will be named RXO Connect starting with Tuesday's spin.”