GXO Beats Soft Freight Market With Earnings Gains for Q3

Company Has Signed New Business Deals Totaling $841 Million So Far This Year
Robotics in GXO warehouse
A GXO employee operates a robotic arm in a warehouse. The Greenwich, Conn.-based company signed new business deals totaling $181 million in the third quarter. (GXO Logistics Inc.)

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GXO Logistics Inc. experienced an increase in third-quarter earnings on revenue growth despite the softer freight environment, the company reported Nov. 7.

The Greenwich, Conn.-based contract logistics firm posted net income attributable to itself of $66 million, or 55 cents a diluted share, for the three months ending Sept. 30. That compared with $63 million, or 53 cents a share, during the same time the previous year. Total revenue increased 8% to $2.47 billion from $2.29 million.

GXO Logistics ranks No. 6 on the Transport Topics Top 100 list of the largest logistics companies in North America.

“We’re very pleased with our performance this quarter,” GXO CEO Malcolm Wilson said during a call with investors the next day. “Against a softer macro, our teams have delivered substantial contract wins as well as strong and predictable adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] and free cash flow.”

GXO noted in the earnings report that it also signed new business deals totaling $841 million year to date. That includes $181 million of new business wins in the third quarter, almost half of which came from companies outsourcing their operations. The report also noted that the sales pipeline remains at approximately $2 billion. GXO, too, completed its acquisition of PFSweb during the quarter, on Oct. 23.

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“We’ve closed another great acquisition,” Wilson said. “As a result, we’ve raised our profit guidance for the third time this year. Our mission remains to enable our customers to run their businesses more efficiently and cost effectively.”

Wilson believes the acquisition positions his company squarely for growth, particularly in North America. He also noted that while the macro environment is uncertain, his company has been driving strong performance in new business wins, profits and cash flow.

“We are succeeding, and we’re also growing our market share,” Wilson said. “Our heightened focus on automation will help fuel our growth and bolster our resiliency, and we’ll continue to optimize our operating model, drive high returns and allocate our capital in the best interest of our shareholders.”

The report noted that operating income increased 25% to $90 million from $72 million. Operating margins improved 49 basis points, while cash flow from operations reached $243 million compared with $116 million during the year-ago period.

GXO gained most of its revenue for the quarter through the omnichannel retail vertical, which increased 14.4% to $1.05 billion from $919 million during the 2022 period. Technology and consumer electronics vertical revenue followed, with contributions rising 6.5% to $360 million from $338 million.

The food and beverage vertical came in next with revenue up 8.1% to $362 million from $335 million. Industrial and manufacturing vertical revenue decreased 4.4% to $263 million from $275 million, and consumer packaged goods revenue bumped up 1.8% to $231 million from $227 million.

“3Q results for GXO came in above our and consensus expectations, with revised guidance pointing to a muted peak season, [foreign exchange] headwinds, and [about] 2 months of PFSweb contributions,” TD Cowen analyst Jason Seidl wrote in a report. “EBITDA margins grew sequentially despite a tough operating environment, and 2024 pipeline continues to build.”

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