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How XPO Logistics Views Its Global Forwarding Business

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XPO’s Global Forwarding operations

XPO Logistics’ (XPO) Global Forwarding business is part of the company’s Transportation segment. The company’s Global Forwarding business is light on assets and provides logistics services through a network of offices that are either company-owned or agent-owned.

XPO provides global forwarding services for domestic, international, and cross-border shipments and views this as a $150.0 billion industry. According to the company, it has an ~1.0% share of this industry.

XPO believes that it has an opportunity to make significant inroads into this industry and can forward freight by leveraging its relationships with domestic, cross-border and international carriers.

XPO also has a subsidiary that acts as an NVOCC (non-vessel-operating common carrier) and transports freight through contracts with vessel operators. XPO’s global forwarding revenues, however, saw a decline in fiscal 2017.

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XPO’s global forwarding business vs. peers

Other players in the global forwarding business include C.H. Robinson Worldwide (CHRW) and Expeditors International of Washington (EXPD). C.H. Robinson Worldwide’s Global Forwarding segment is a major source of revenues for the company. CHRW’s global forwarding business offers logistics services through contracts with independent agents and an international network of offices.

The global forwarding business covers ocean and air freight services as well as customs brokerage services. In fiscal 2017, C.H. Robinson Worldwide had global forwarding revenues of $2.1 billion, up 36.0% year-over-year. This rise in the company’s revenues resulted from revenue growth across all service lines—including ocean, air, and customs.

Global forwarding was also a primary business for Expeditors International of Washington. In fiscal 2017, air freight services accounted for 42.0% of the company’s total revenues of $6.9 billion. Ocean freight and customs brokerage made up 30.0% and 28.0%, respectively, of its total revenues.

ETF discussion

For investors interested in the transportation sector, the SPDR S&P Transportation ETF (XTN) is an industry-specific option. This ETF has an exposure of 24.9% to the trucking (JBHT) industry and 43.2% to the airline industry.

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