XPO Logistics reports income of $3 billion as spinoff approaches

Ahead of its third-quarter earnings call, XPO Logistics reported expected earnings of $3.04 billion.

The earnings call is scheduled on the last day of October. The next day, it officially spins off its high-tech transportation brokerage platform as an independent publically traded company, Charlotte, N.C.-based RXO.

XPO Logistics reported in a statement to the media that it expects third-quarter operating income of $181 million to $185 million.

For its North American less-than-truckload segment, the company expects for third quarter 2022 to see a year-over-year increase in revenue per hundredweight, excluding fuel, of approximately 7%.

The LTL operating ratio (operating expenses divided by revenue) is estimated to be 85.1%. In general, the lower the operating ratio, the more likely a company can generate profits.

The company expects its North American LTL earnings before interest, taxes and amortization for 2022 to be at least $1 billion. That includes gains of $50 million from real estate sales in the fourth quarter.

For its North American LTL business, and for the period from 2021 (the most recent reported fiscal year) through 2027, XPO expects a compound annual revenue growth rate of 6% to 8%. That assumes gross capital expenditures of 8% to 12% of revenue, on average. Earnings before taxes, interest, taxes, depreciation and amortization were estimated to grow 11% to 13% annually.

XPO competes for LTL business with FedEx Freight, Old Dominion, Yellow Corp., Estes Express Line, and others.

The RXO spin-off is projected to produce 2027 earnings before interest, taxes, and amortization of $475 million to $525 million.

Drew Wilkerson, formerly XPO’s president, becomes CEO of the spin-off company. Mario Harik, LTL president for XPO, becomes XPO CEO as Brad Jacobs steps down from the post. Jacobs remains XPO executive chairman of the board and also serves as nonexecutive chairman of RXO.

In March, XPO sold its North American intermodal business, XPO Logistics, to Downers Grove, Ill.-based STG Logistics Inc.

Greenwich, Conn.-based XPO Logistics Inc. provides primarily less-than-truckload freight services. It serves 50,000 shippers from about 750 locations. It is publically traded on the New York Stock Exchange. LL

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