XPO Logistics sees strong margins in Q2, despite challenges

XPO facility with conveyors

Photo: XPO Logistics

Connecticut-based XPO Logistics reported strong margins during its second quarter this year, despite a decline in revenue and tough market conditions.

The company’s stronger performance in North American less-than-truckload (LTL) operations helped to offset market weakness, and will inform XPO’s operational strategy going forward, company Chairman and CEO Bradley Jacobs said in a statement.

“We’re implementing innovations in North American LTL to drive the next leg of profit improvement,” Jacobs said. “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.”

XPO also aims to utilize technology, such as “machine learning for dynamic pricing, route optimization of pickup and delivery, linehaul efficiency and yard management” to reach earnings before interest, tax, depreciation and amortization (EBITDA) of US$1 billion in 2021.

XPO reported that revenue for Q2 is down 2.8% year-over-year to $4.24 billion year-over-year. Meanwhile, net income for Q2 decreased by 11.6% y-o-y to $122 million. Organic revenue saw growth of 4.8% y-o-y for the quarter to $1,580 million, and increased YTD by 1.2% y-o-y.

In a research note on XPO’s Q2 performance, Morgan Stanley said that moving forward, XPO needs to deliver four quarters of growth to restore momentum to its net revenue, which sat at 2.5-4.5% for the quarter. Ultimately, Morgan Stanley’s note indicates the company’s performance during the quarter demonstrates that management guided the company well, in spite of a tough market environment combined with the recent end of the company’s ties with Amazon.

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