On October 30, 2024, XPO Inc (XPO, Financial) released its 8-K filing detailing its financial results for the third quarter of 2024. The company reported diluted earnings from continuing operations per share of $0.79, falling short of the analyst estimate of $0.82. However, XPO's revenue of $2.05 billion exceeded the estimated $2.02 billion, marking a 3.7% increase from the same period in 2023.
Company Background and Strategic Positioning
Following the spinoff of its contract logistics division (GXO) in 2021 and freight brokerage operations (RXO) in 2022, XPO Inc (XPO, Financial) is transitioning towards becoming a pure-play asset-based less-than-truckload (LTL) carrier. On a pro forma basis for the RXO spinoff, LTL shipping now constitutes approximately 60% of total revenue, with European truckload and LTL operations making up the remaining 40%. The company's LTL segment EBITDA mix is notably higher than 60%, and XPO is considering divesting its European trucking division when a suitable buyer is found.
Performance Highlights and Challenges
XPO Inc (XPO, Financial) reported a 10.5% increase in net income from continuing operations, reaching $95 million compared to $86 million in the third quarter of 2023. The adjusted diluted EPS rose to $1.02 from $0.88, reflecting a 15.9% increase. Despite these gains, the company's performance was challenged by a soft freight environment, impacting its North American LTL segment.
Mario Harik, CEO of XPO, stated, “We reported strong year-over-year earnings growth in the third quarter, as we continued to improve the business in a soft freight environment. Companywide, we increased adjusted EBITDA by 20% and adjusted diluted EPS by 16%.”
Financial Achievements and Industry Implications
XPO's North American LTL segment achieved a 16.5% increase in adjusted operating income, reaching $198 million. The segment's adjusted operating ratio improved by 200 basis points to 84.2%, driven by a 6.7% increase in yield, excluding fuel, and a 6.6% rise in revenue per shipment. These achievements underscore XPO's strategic focus on enhancing operational efficiency and pricing power, crucial for maintaining competitiveness in the transportation industry.
Key Financial Metrics and Analysis
The company's adjusted EBITDA for the third quarter was $333 million, up from $278 million in the previous year, marking a 19.8% increase. This growth was primarily attributed to higher yield and lower purchased transportation costs. XPO generated $264 million in cash flow from operating activities and ended the quarter with $378 million in cash and cash equivalents, after $123 million in net capital expenditures.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenue | $2.05 billion | $1.98 billion | 3.7% |
| Net Income | $95 million | $86 million | 10.5% |
| Adjusted EBITDA | $333 million | $278 million | 19.8% |
| Adjusted Diluted EPS | $1.02 | $0.88 | 15.9% |
Conclusion
XPO Inc (XPO, Financial) demonstrated resilience in the third quarter of 2024, with revenue surpassing expectations despite challenges in the freight market. The company's strategic focus on operational efficiency and pricing improvements in its North American LTL segment contributed to its financial achievements. As XPO continues to navigate the current market conditions, its performance will be closely watched by investors and industry analysts alike.
Explore the complete 8-K earnings release (here) from XPO Inc for further details.
