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XPO Beat 1Q18 Estimates, but Higher Operating Costs Hurt Stock

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XPO’s 1Q18 earnings

XPO Logistics, the US’s second-largest LTL (less-than-truckload) services provider, announced 1Q18 earnings after market hours on May 2. The company will hold its conference call on May 3 at 8:30 AM EST. The dominant road freight carrier (JBHT) in the US reported adjusted EPS (earnings per share) of $0.61, surpassing analysts’ estimate of $0.51. The company beat analysts’ projections by a wide margin of 19.6%.

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XPO Logistics’ adjusted EPS skyrocketed 103% YoY (year-over-year) from $0.30 in 1Q17 to $0.61 in 1Q18. However, the markets weren’t impressed. On May 2, XPO stock lost 2.0% to close at $93.59. The company’s stock tumbled ~1.7% after market close, touching $92.0. The big name in LTL trucking (ODFL) said it was compelled to increase the dock and warehouse workers’ wages in specific markets by ~5%. Apart from that, the addition of 30 hubs to bring down transit time for e-commerce deliveries weighed on 1Q18 operating costs.

1Q18 revenues and operating stats

XPO Logistics was able to exceed analysts’ 1Q18 revenue estimates of $3.9 billion by 7%. The company reported revenues of $4.2 billion in 2018, which were 18.4% higher than 1Q17’s $3.5 billion revenues. The trucker’s (IYT) organic revenue growth was 11% in 1Q18. Revenue growth was driven by strong last-mile deliveries fueled by e-commerce demand and a 30% jump in freight brokerage (CHRW) revenues.

XPO’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) were $330.2 million in 1Q18, a rise of 13.8% YoY compared with $290.0 million in 1Q17.

Management thoughts

Bradley Jacobs, XPO’s chair and CEO, said, “We’re making disciplined investments in innovation and sales to propel long-term growth.” He added, “In sales, we won a record $972 million of new business in the first quarter, and our sales pipeline stands at $3.6 billion. We remain on track to deliver at least $1.6 billion of adjusted EBITDA and approximately $625 million of free cash flow this year.”

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