XPO Freight Reports Mixed Earnings Amid Declining Tonnage Trends

GREENWICH, Conn. – XPO Freight announced its financial results on Thursday, exceeding analyst expectations, but facing challenges with declining tonnage.

The less-than-truckload (LTL) carrier reported adjusted earnings per share of $1.05, surpassing the consensus estimate by 6 cents, though it marked a 7-cent decline from last year. This figure excludes transaction and restructuring costs.

XPO’s LTL unit generated $1.24 billion in revenue, a 2.5% year-over-year decline, reflecting a 6.7% decrease in tonnage per day. Despite this, the company saw a 4.2% rise in revenue per hundredweight, or yield, up 6.1% if fuel surcharges are excluded.

The weak manufacturing economy has impacted the LTL industry’s tonnage in the quarter. Year-over-year comparisons showed XPO’s tonnage fell by 5.5% in April, 5.7% in May, and 8.9% in June, with preliminary results for July indicating another 8% decline.

Although XPO acknowledged the usual seasonal dip in June, it stated that July showed some improvement compared to typical seasonal patterns. The recent tonnage comparisons have shown a more significant decrease from previous quarters, exacerbating challenges for the company.

However, there are positive developments as XPO has added over 5,000 local accounts this year, primarily from small-to-midsize businesses that yield higher margins. Shipments from this group rose significantly in the second quarter, increasing XPO’s LTL revenue share from 20% to a goal of 30%.

The LTL unit’s operating ratio improved to 82.9%, a 30 basis point increase year-over-year. The company has also reduced transportation costs, which helped lower expenses by $36 million compared to last year.

XPO has been leveraging technology to enhance productivity, including an AI model that has cut linehaul miles by 3%, empty miles by 10%, and greatly reduced freight diversions. These changes are allowing XPO to operate more efficiently.

Despite a challenging year, XPO remains focused on growth. The company anticipates no change in operating ratio for the third quarter, hoping for improvements in revenue per shipment and tonnage. In Europe, XPO reported a 4% year-over-year revenue increase to $841 million.

With $247 million in cash flow from operations this quarter, XPO has also managed to reduce its net debt leverage significantly. Shares of XPO were down 8.9% at 3:05 p.m. EDT on Thursday.