XPO Net Income Sets Record; CEO Eyes Major Acquisitions in US, Europe
XPO Logistics reported that profits increased 11% in the second quarter, setting records in net income and revenue on the back of growth in the last-mile e-commerce and contract logistics.
CEO Brad Jacobs also told Transport Topics that the company is actively looking at potential large mergers and acquisitions in North America and Western Europe, preferring to pursue third-party logistics companies that may own trucks rather than asset-heavy companies with a logistics subdivision.
“Even though most of our business is in North America and Western Europe, we are in 31 different countries. So some of the companies we’re looking at are multinational or multicontinent,” he said. “We have a preference for non-asset companies, but like XPO Logistics, many of the companies that we are looking at are large companies that have both asset and non-asset businesses within them.”
The less-than-truckload and third-party logistics giant earned $47.6 million or 38 cents per share during the three-month period ending June 30. On an adjusted basis, profits were $75 million or 60 cents. The Bloomberg News consensus adjusted earnings forecast called for $77.3 million or 60 cents.
One year ago, the nonadjusted profits were $42.6 million or 35 cents.
Revenue grew 2.1% to $3.76 billion.
“We had a slew of records across the board,” Jacobs told TT. “We achieved a company best for EBITDA of $371 million, and we again grew margins in both transportation and logistics. We also generated strong cash flow from operations of $216 million, well ahead of expectations. We’re also experiencing strong sales growth. We’re winning large deals.”
Jacobs noted that investments in technology and sales have yielded $1.43 billion in new business through June, up 62% from last year.
In the transportation division, less-than-truckload revenue increased 7.8% to $946.1 million. Total pounds shipped per day increased 7.1%, weight per shipment increased 3.8% to 1,382, and total shipments per day grew 3.2% to 56,926. Gross revenue per shipment went up to $267.32 from $254.91. Expenses in the LTL division increased $500,000 year-over-year to $168.5 million in the second quarter.
Freight brokerage revenue rose 10% to $572.3 million, but net revenue, after deducting transportation expenses, declined 4.9% to $83.8 million. Nevertheless, operating expenses in the brokerage division also were cut, $1.3 million to $22.1 million total.
“There was an increase in the price of purchased transportation as the spot market went up in price. Net revenue margin did compress in our brokerage, but in July the margins expanded because the market loosened,” Jacobs said. “We have most of our business in contract in truck brokerage, so we know what price we’re going to get paid and we cover it month-by-month on the spot market. So when the spot market prices go up, our margins are compressed.”
Last-mile revenue jumped 15% to $230.4 million and went up 11% to $69.6 million after removing transportation costs. Operating expenses went up to $15.1 million from $13.4 million one year ago.
North American transportation revenue went up 1% to $1.75 billion, even though XPO Logistics could count upon the $133.4 million from Con-way’s truckload division, which was sold to TFI International Inc. last autumn.
Logistics revenue in XPO’s North American and European operations rose to $1.4 billion in the quarter compared with $1.33 billion for the same period in 2016. The year-over-year increase in revenue was primarily due to strong demand for contract logistics business, including the e-commerce and industrial sectors in North America. Operating income, after deducting expenses from revenue, jumped 26% to $64.3 million.
XPO’s contract logistics division handles packaging, e-fulfillment, warehousing, distribution, reverse logistics, omnichannel, and aftermarket business. XPO also is upgrading the logistics division with strong investments in automation and robotics.
The results continue a remarkable turnaround for the Greenwich, Conn., company. During the first half of 2017, profits have tripled to $67.1 million from $22 million during the same period last year. However, revenue only grew 1% in the first six months to $7.3 billion.
Jacobs also confirmed that XPO is exploring candidates for acquisitions, although he didn’t give a timetable. It’s a different perspective than he took at an industry conference in February when M&A activity wasn’t on the table. He credited the change to being in a better place integrating all the pieces of the business from the 2015 deals.
XPO ranks No. 1 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 3 on the TT100 list of the top North American for-hire carriers.
