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A Look at XPO Logistics’ Transportation Segment

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XPO Logistics: Transportation segment

XPO Logistics’ (XPO) Transportation segment generates ~63.0% of its revenues. The company’s Transportation division provides services in five areas:

  • freight brokerage
  • last-mile logistics
  • less-than-truckload (or LTL)
  • full truckload
  • global forwarding

In fiscal 2017, XPO’s Transportation vertical had revenues of $9.8 billion, up 3.8% year-over-year. Now let’s take a detailed look at the freight brokerage services of XPO’s Transportation business.

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XPO’s freight brokerage services

XPO’s freight brokerage services include truck brokerage on a global basis and intermodal, expedited, and drayage services in the United States. The company’s truck brokerage business is a non-asset-based business. The truck brokerage business includes XPO placing its customers’ freight with trucking companies. This service is priced either on a contractual basis or on a spot market basis.

XPO’s Freight Optimizer is a cloud-based brokerage platform that allows the company to look into the supply and demand trends of its truckloads in real time.

XPO Logistics views the truck brokerage segment as a business that requires minimal capex (capital expenditure) with high free cash flows. The company also expects this market to expand further, as this is a highly fragmented market. As customers continue to outsource freight transportation, XPO expects to benefit from this trend.

Investing in ETFs

The SPDR S&P Transportation ETF (XTN) holds 2.5% of XPO Logistics. This ETF holds 43.5% in airline companies and 24.7% in trucking companies. XTN also holds 2.5% each in C.H. Robinson Worldwide (CHRW), Old Dominion Freight Line (ODFL), and Union Pacific (UNP).

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