XPO issues solid preliminary 3Q earnings results

Greenwich, Conn.-based truckload and less-than-truckload (LTL) services provider XPO Logistics issued preliminary third quarter 2022 and long-term financial targets in advance of the company’s October 31 release date.

XPO said it expects to report $3.04 billion in quarterly revenue and operating income to come in between $181 million-to-$185 million, with EBITDA pegged at $348 million-to-$352 million.

XPO said it is expecting its North American LTL unit is expected to report a roughly 7% increase in revenue per hundredweight, excluding fuel; a roughly 2.9% annual decrease in weight per day for the third quarter, with weight per day trending up each month through September and “inflecting positive” on an annual basis in September.

Other expected North American LTL results announced by XPO included:

• an operating ratio of roughly 85.1%;
• an adjusted operating ratio of 82.9% or better, an improvement of at least 150 basis points annually, excluding real estate gains for both periods, and an annual improvement of 50-to-100 basis points in North American LTL adjusted operating ratio for full-year 2022, excluding gains on sales of real estate;
• at least $1 billion of full-year 2022 adjusted EBITDA generated by North American LTL, which includes up to $50 million of gains on sales of real estate in the fourth quarter

And for its North American truck brokerage business, which falls under the category of Brokerage and Other Services, XPO is expecting to report third quarter volume to be up around 9%, with revenue to be down around 2%.

For the period from 2021, the most recent reported fiscal year, through 2027, XPO expects North American LTL revenue growth to come in at a compound annual growth rate of 6%-to-8%, with adjusted EBITDA to grow at an annual compound annual growth rate between 11%-to-13%. For the RXO spin-off, it expects 227 adjusted EBITDA to come in between $475 million-to-$525 million, with annual capital expenditures of around 1% of revenue from 2023-2027.

As previously reported, XPO plans to spin off its North American truck brokerage from its less-than-truckload business, as well as its related asset-light businesses, effective November 1, 2022, which will be named RXO. XPO officials said that RXO will be comprised of a proprietary digital freight marketplace, access to vast truckload capacity, and complementary brokered services for managed transportation, last mile, and freight forwarding.

XPO officials said in March that these initiatives will create two focused, publicly-traded companies at the top of their industries.

“Our two core businesses of North American less-than-truckload and tech-enabled truck brokerage are industry-leading platforms in their own right, each with a distinct operating model and a high return on invested capital,” said Brad Jacobs, chairman and chief executive officer of XPO Logistics, in March. “We believe that by separating these businesses through a spin-off, we can significantly enhance value creation for our customers, employees and shareholders, as we did with our successful spin-off of GXO last year.”

XPO said that the spin-off would represent a leading platform for North American tech-enabled truck brokerage services, citing its history of industry-best revenue and margin growth, a highly-efficient freight marketplace and access to a large amount of truckload capacity, in addition to its asset-light services, including last-mile logistics, managed transportation, and global forwarding.

On the LTL side, XPO said the when the spin-off is official it will be a “pure play LTL industry leader” and the third largest provider of domestic and cross-border LTL freight shipping, with a competitively advantaged network of transportation assets managed by proprietary technology.