[Stay on top of transportation news: Get TTNews in your inbox.]
Global freight transportation and logistics provider XPO Logistics reported mixed financial results for the third quarter on Oct. 28.
The Greenwich, Conn.-based company’s net income rose 18% to $136 million, or $1.27 per share, from $115 million, or 81 cents, in the same year-ago period.
However, revenue dropped 4.4% to $4.15 billion, compared with $4.33 billion during the same period a year ago. The company’s revenue estimates were below Wall Street’s expectations of $4.27 billion.
The company’s adjusted operating ratio for its less-than-truckload operation was a quarterly record of 80.8% from 85.4% in the same period last year. The company said the sale of real estate accounted for much of the improvement.
Operating ratio, or operating expenses as a percentage of revenue, is used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.
“Our significant investments in technology are creating tailwinds across our operations. We’re executing on 10 initiatives that represent a pool of $700 million to $1 billion of potential profit improvement over the next several years,” CEO Brad Jacobs said. “One large opportunity is to apply our XPO Smart productivity tools to the $5 billion of annual costs related to our variable labor spend. All 10 initiatives are specific to XPO and largely independent of the operating environment. We’re very focused on the size of the prize and the meaningful potential uplift to our profitability.”
In June the company announced its XPO Smart workforce productivity tools in its LTL network, which is designed to make terminal operations more efficient. The tools track motor moves, which are goods moved from dock-to-truck, against production targets and analyze productivity gaps to improve performance.
XPO’s transportation division generated $2.68 billion in revenue for the third quarter 2019, down 6% compared with $2.85 billion for the 2018 period. XPO said the decline reflects a reduction in freight brokerage and direct postal injection business from the company’s largest customer, unfavorable foreign currency exchange and lower truckload rates in freight brokerage.
In the third quarter, XPO’s logistics division generated revenue of $1.51 billion, slightly lower than the year before when that unit produced $1.52 billion. Organic revenue growth was 2.4%. Segment revenue growth was led by food and beverage, consumer packaged goods, aerospace and health care in North America and by e-commerce in Europe.
Jacobs said technology improvements are helping keep the company profitable at a time when the economy is showing signs of slowing.
“The industrial economy has been challenging for over a year now,” Jacobs said in an interview. “We’re way past the point of figuring out if it’s an industrial recession or now. It has been an industrial recession for a while.
“We look at the macro conditions as staying soft for a while. We don’t see any events that would cause a quick, significant improvement in the economy either here or in Europe.”
For the nine months ended Sept. 30, XPO reported net income of $282 million, or $2.63, compared with $306 million, or $2.26, for the same period in 2018.
Operating income was $619 million for the first nine months, compared with $578 million the year before.
Revenue was $12.51 billion, compared with $12.89 billion.
XPO ranks No. 1 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 3 on the TT Top 100 list of the top for-hire carriers.
Want more news? Listen to today's daily briefing: