XPO Profits Soar in Fourth Quarter
XPO Logistics Inc. reported fourth-quarter profits grew sevenfold, reflecting strength in its last-mile deliveries, brokerage and less-than-truckload businesses.
Results also were bolstered by the Tax Cuts and Jobs Act of 2017, whereby companies must revalue their tax deferred liabilities from 35% to the new 21% corporate tax rate, leading to one-time benefits. But excluding the impact from the law, XPO still nearly doubled its bottom line.
The Greenwich, Conn.-based company earned $188.5 million or $1.42 per diluted share — including $147.9 million from the tax benefit. That compares with $27.3 million, or 22 cents, the year before.
Revenue rose to $4.2 billion (topping analysts’ consensus forecast of $3.9 billion) compared with $3.7 billion in the same year-ago quarter.
XPO, which ranks No. 1 on the Transport Topics Top 50 list of largest logistics companies in North America and No. 3 on the Top 100 list of largest for-hire carriers, also logged adjusted profit of $59.2 million (topping analysts’ consensus of $58.4 million).
For the year, profit soared to $312.4 million, or $2.45, versus $63.1 million, or 53 cents, the year before. Revenue rose to $15.4 billion from $14.6 billion.
The year marked a turnaround for a company that lost $246.4 million in 2015.
It also did not earn a profit in nine consecutive quarters between 2014 and 2016.
“One standout in the quarter was the vigorous organic revenue growth,” CEO Brad Jacobs told Transport Topics.
Jacobs
The growth of 10.4% was led by gains in freight brokerage, last mile and contract logistics, he said, adding that a strong holiday peak played directly to strengths in e-commerce.
“We signed up during the year $2.8 billion in new business, a year-over-year increase of 55%. Our global sales pipeline is over $3.2 billion,” Jacobs said.
Freight brokerage gross revenue grew by nearly one-third to $767.3 million in the quarter. After paying for transportation, net revenue surged 40% to $130.4 million. Margins improved 91 basis points in the quarter to nearly 17%, although it dropped about 110 basis points to 15.7% for the full year.
“Our margins are better now because about 70% of our business is spot and 30% contractual. Our revenue and margins were higher in the fourth quarter and continued to be strong in January. We saw a lot more spot business this January than a typical January,” Jacobs said.
Less-than-truckload revenue grew 4% to $887.4 million in the quarter. Although shipments per day slipped 0.5% to 53,791, the average weight per LTL shipment grew 3.4% to 1,398 pounds and revenue per shipment went up to $285.87 from $263.81. The average length of haul also ticked up to 821.7 miles from 820 a year ago. Operating income in the LTL division skyrocketed 44% to $79 million and the operating ratio was the best in 12 years.
Jacobs announced that XPO will add 170 LTL salespeople due to strength in the industrial market. About 90 of the positions have been filled and the remaining 80 will be filled over the next two months.
Last-mile revenue jumped more than 21% to $286.5 million.
“Last mile is on fire right now, mainly due to e-commerce,” Jacobs said. “E-commerce customers, as a whole across all our business lines, is clearly the fastest type of customer, growing 20% year-over-year. Retail/e-tail is up to 29% of our companywide revenue.”
$XPO reports record fourth quarter 2017 #results. #Q4FY17https://t.co/hCEUsVK4Ll pic.twitter.com/IkQR7yidwB — XPO Logistics, Inc. (@XPOLogistics) February 7, 2018
For the year, brokerage revenue climbed 17% to $2.5 billion while LTL rose 5.7% to $3.6 billion and last mile was up 17% to $966 million.
In the contract logistics division, which also benefits from e-commerce, revenue climbed 13% in the quarter to $1.6 billion and operating income improved 18% to $60.3 million. For the year, logistics revenue increased 7.5% to $5.7 billion and operating income grew 19% to $209.5 million.
“Omnichannel distribution in North America grew 19% in the quarter. We had a 24% spike in e-fulfillment volume in our U.S. contract logistics facilities during the Black Friday-Cyber Monday peak. In reverse logistics, returns management, we are seeing record demand after the holidays,” Jacobs said.
Intermodal revenue grew 7.3% in the fourth quarter, Jacobs said. Truck capacity at the ports was tighter in the fourth quarter with higher rates on drayage, ocean and airfreight forwarding, he said. (XPO does not disclose intermodal, drayage or nonvessel operating common carrier revenue as separate line items.)
Jacobs did not provide new details on plans to make a major acquisition or two before the end of 2018, other than to reiterate that the candidates are headquartered in Western Europe or North America. Previously, he said he would prefer logistics companies that may own some trucks rather than an asset-heavy operation with a logistics division.
Nor did he comment on published reports that Amazon.com Inc. and The Home Depot Inc. may attempt to purchase XPO.
