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Why XPO Could Beat Analysts’ Q2 2018 Earnings Estimate

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Analysts’ estimate for XPO’s earnings

Previously, we looked at the key factors that could decide whether XPO Logistics (XPO) will be able to meet analysts’ consensus revenue and margin estimates. In this part of the series, we’ll look at the key factors that are likely to impact its earnings and whether it will meet analysts’ earnings expectations.

For XPO, analysts estimate adjusted EPS of $0.98 in the second quarter. That’s a 63.3% growth rate YoY (year-over-year). For 2018, they expect $3.43 with a growth of 76% YoY.

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Factors impacting XPO’s Q2 earnings

XPO expects to have interest expense of ~$60 million in the second quarter. In the same period last year, its interest expense was $74.3 million due to a debt reduction the previous year. Lower interest expenses should benefit its Q2 2018 net earnings. Integration synergies from past acquisitions should also lower its overall expenses in the quarter.

XPO expects an effective tax rate of 22%–25% and cash taxes of ~$125 million, which translates to a higher effective tax rate over the rest of the year. It expects capex of $450 million–$475 million in 2018. A major chunk (40%) of capex will be for technology.

Peers’ 2018 EPS and growth

Now let’s look at analysts’ consensus adjusted EPS estimates for XPO’s peers for 2018. United Parcel Service (UPS) is expected to post EPS of $7.25, an estimated 20.6% growth. For Werner Enterprises (WERN), analysts anticipate EPS of $2.01, up ~58% YoY from $1.27 in 2017.

C.H. Robinson Worldwide (CHRW) is expected to report EPS of $4.36, up 30.1% from $3.35 last year. Old Dominion Freight Lines (ODFL) is anticipated to report EPS of $6.50 compared to $4.43 in 2017, or 46.8% annual growth.

The SPDR S&P Transportation ETF (XTN) has a 2.3% exposure to XPO Logistics. It has a 43.8% weight in the airline sector, a 24.5% weight in trucking companies, and 13.5% in US railroad companies.

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