XPO Logistics: Europe Led Logistics Revenue Growth in 2Q17
XPO’s Logistics segment in 2Q17
In this part of the series, we’ll focus on XPO Logistics’ (XPO) Logistics segment, which witnessed revenue growth across North America and Europe. On a year-over-year basis, revenues rose 4.7% to $1.4 billion in 2Q17. On a constant currency basis, the segment’s revenues expanded 8.0% in the reported quarter.
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Logistics segment by geography
In 2Q17, XPO Logistics registered a 5.5% growth in its European logistics division to $737.0 million. Without the impact of currency translation, revenues rose more than 12.0%. New contracts with e-commerce (AMZN) and food and beverage customers (ADM) led to higher revenues. Operations in the Netherlands, Spain, and the United Kingdom also fueled the rise in revenues.
In its North American logistics, XPO’s revenues rose 3.9% to $658.1 million, from $633.3 million in 2Q16. The company recorded phenomenal growth in contract logistics revenues, rising in the high single digits in 2Q17. However, revenue growth was negatively impacted by a fall in managed transportation revenues.
XPO Logistics has a five-year average contract tenure with high renewal rates. The company is designing a next-generation logistics facility in association with a key client. XPO intends to implement technological innovations at more than 750 of its logistics facilities globally. The company mentioned that it’s working on new contracts in 2017. They’re expected to be five to ten years in duration with an 18-month sales cycle.
According to XPO, the European economy has picked up with a rise in consumption sequentially in 2017, particularly in France after the country’s May elections. Faster movement for European manufacturing, retail, and e-commerce in the second half of 2017 should push XPO’s Logistics segment forward.
Peer group’s geographical revenues
XPO Logistics earns 60.0% of its revenues from the United States. The rest is derived internationally, especially from the United Kingdom and France. Among its peers, ArcBest (ARCB) gets almost 100% of its revenues from operations in the United States. Leading less-than-truckload (XLI) carrier Old Dominion Freight Lines (ODFL) derives 95.0% of its revenues from US operations and the balance from its overseas business.
In the next part, let’s take a look at XPO’s EBITDA (earnings before interest, tax, depreciation, and amortization) in 2Q17.