XPO Logistics, based in Greenwich, Connecticut, has reported impressive third-quarter financial results as it prepares to spin off its truck brokerage and asset-light transportation division into a separate company called RXO. The performance demonstrates resilience in a challenging market environment.
Financial Highlights: Structural Improvements Drive Growth
Revenue: Total revenue reached $3.04 billion, down 7% year-over-year. However, excluding revenue from the intermodal business sold in March 2022, revenue actually increased by 3%.
Profitability: The company achieved significant margin improvements:
- Operating income rose 39.5% to $185 million
- Adjusted EBITDA reached a record $350 million, surpassing analyst expectations of $340 million
- Adjusted diluted EPS of $1.45 beat Wall Street projections of $1.33
This marks the ninth consecutive quarter of record adjusted EBITDA and the tenth straight quarter of exceeding analyst expectations.
Strategic Transformation: The RXO Spinoff
This quarter's report represents the final consolidated results including the truck brokerage operations, which will become independent as RXO on November 1. The separation allows XPO to focus exclusively on its less-than-truckload (LTL) business while RXO pursues growth in brokerage services.
Business Segment Performance
North American LTL: The core business showed particular strength:
- Revenue increased 12% to $1.204 billion
- Pricing power evident with revenue per hundredweight (excluding fuel) up 7%
- Adjusted operating ratio improved 160 basis points to 82.8%
Brokerage and Other Services: Revenue declined 15% to $1.921 billion due to market conditions, though the business maintained strong margins.
Management Commentary
XPO Chairman and CEO Brad Jacobs stated: "Our record third-quarter results demonstrate that both our North American businesses have strong growth potential as standalone companies. Our LTL 2.0 plan is delivering significant results, with September marking a return to positive volume growth that accelerated in October."
Regarding the brokerage business, management highlighted a 19% gross margin and 31% gross profit growth, attributing success to their digital platform (to be renamed RXO Connect after the spinoff).
Full-Year Outlook
XPO anticipates full-year North American LTL adjusted EBITDA of at least $1 billion, including approximately $50 million from real estate sales in Q4. The company expects to improve its adjusted operating ratio by 50-100 basis points for the year.
The strong quarterly performance positions both XPO and the soon-to-be-independent RXO for success in their respective market segments, with clear strategies focused on operational efficiency and technological innovation.