XPO Posts Record Q1 Earnings as OR Improves

“We’re also running one of the fastest networks in the industry with the largest number of standard one-day and two-day lanes,” Harik said. (XPO)

XPO Inc. built momentum as margins and operating ratio improved during the first quarter, the less-than-truckload carrier reported April 30.

Greenwich, Conn.-based XPO posted net income of $101 million, 85 cents a diluted share, for the three months ending March 31. That compared with $69 million, 58 cents, during the same time the previous year.

XPO’s North American LTL adjusted OR improved 200 basis points year over year to 83.9. Total revenue increased 7.3% to $2.1 billion from $1.95 billion.

“We reported record first-quarter earnings with strong momentum across the business,” XPO CEO Mario Harik said during a call with investors. “These results mark a clear acceleration of our performance, driven by the disciplined execution of our strategy.”

Harik added that customer service continues to make significant progress as part of the strategy. XPO reduced its damage claims ratio to a record low of 0.2%. He views this as the most important service metric when it comes to LTL customers. The company has focused on developing artificial intelligence that reduces damages.

“These tools evaluate load quality in real time and help us protect our customers’ freight,” Harik said. “We’re also running one of the fastest networks in the industry with the largest number of standard one-day and two-day lanes.”

Harik added that this has translated into better commercial outcomes, including stronger pricing and ongoing market share gains. The company has also worked to prepare its network to support further demand by investing in the workforce, fleet and service centers. Harik views these as the three main components of capacity for moving freight.

“We have a proprietary workforce planning model that uses technology to flex labor hours as demand changes,” Harik said. “This allows us to improve productivity while maintaining high service levels. Taken together, our investments in capacity are creating strong operating leverage that will enhance our bottom line as the cycle turns.”

Harik noted local customers are one area where the company is continuing to earn market share. He is also continuing to see a shift toward higher quality freight, including shipments that need premium services.

He noted that demand for rollout offerings was a key driver of margin improvement in Q1. He has also been seeing increased adoption in verticals like grocery and healthcare, especially when it comes to customers with service-sensitive freight.

“In short, we have multiple levers we can execute and a long runway to build on our momentum, with a double-digit pricing opportunity over the years to come,” Harik said.

Revenue by Segment

• North American Less-Than-Truckload segment revenue increased 4.9% to $1.23 billion from $1.17 billion during the prior-year period. The report highlighted that yields, shipments per day and tonnage per day all increased. Operating income increased 19.6% to $189 million from $158 million.
   
• European Transportation segment revenue increased 11% to $868 million from $782 million during the same time the prior year. But the segment also reported an operating loss of $6 million, compared with an operating income of $1 million.

XPO ranks No. 5 on the Transport Topics Top 100 list of the largest for-hire carriers in North America and No. 39 on the TT Top 50 list of the largest global freight companies.