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XPO Logistics Inc. reported May 3 that its first-quarter net income was the highest of any first quarter while revenue reached an all-time record.
The Greenwich, Conn.-based trucking and logistics company posted net income attributable to common shareholders of $115 million, or $1.02 a diluted share, for the three months ending March 31. That compared with $21 million, 20 cents, during the same time the previous year.
Total revenue increased by 21.1% to $4.77 billion from $3.86 billion.
“In the first quarter, we reported the highest revenue of any quarter in our history, appreciably outpacing a macro that’s recovering faster than expected,” XPO Logistics CEO Brad Jacobs said in a statement. “Our net income and adjusted EBITDA were both first-quarter records, and we grew adjusted [earnings per share] by 112% year-over-year.”
The results exceeded the expectations of investment analysts on Wall Street, which had been looking for 93 cents per share and quarterly revenue of $4.33 billion, according to Zacks Consensus Estimate.
The transportation segment reported that Q1 revenue increased 19.4% to $2.99 billion from $2.46 billion during the same time last year. Operating income for the segment increased 42.6% to $209 million from $120 million.
The increase in transportation operating income was related primarily to higher profitability in truck brokerage and in less-than-truckload operations. In North American truck brokerage, Q1 revenue increased by 83% year-over-year to $589 million from $321 million.
“In North American less-than-truckload, we improved our first-quarter adjusted operating ratio, excluding real estate sales, by 220 basis points year-over-year to 84.3%,” Jacobs said. “Our LTL business has strong momentum: Our technology is expanding margin, and the recovery in the industrial economy is stimulating demand for our services.”
The XPO Connect digital platform also helped to drive growth in truck brokerage operations. The service provides shippers and carriers an integrated platform designed for every mode of transportation to help them make informed decisions, the company said.
The logistics segment reported that Q1 revenue increased 20.9% to $1.82 billion from $1.44 billion last year. Operating income for the segment increased 44.1% to $68 million from $38 million during the prior-year quarter.
“In logistics, our record first-quarter revenue of $1.82 billion was propelled by the ‘big three’ logistics tailwinds: e-commerce, outsourcing and warehouse automation,” Jacobs said. “We’ve won a tremendous amount of logistics business in the first four months of this year, including a $1.8 billion contract with a longstanding customer that extends and expands our relationship through 2032. This is the largest contract in our company’s history.”
The year-over-year increase in logistics segment revenue was primarily due to 13% organic revenue growth, the acquisition of contract logistics operations in the U.K. and Ireland, and a benefit from foreign currency conversion. The increase in operating income was primarily related to higher revenue from contracts won in prior periods, XPO said.
The logistics segment results bode well for an upcoming spinoff company, GXO Logistics, planned for the second half of 2021. GXO Logistics will incorporate XPO’s logistics operations into a standalone company.
XPO said in the earnings report that the spinoff plans are on track. Eight executives have been named to GXO’s leadership structure, including CEO Malcolm Wilson. It also filed a confidential initial Form 10 registration statement.
Cowen and Co. expressed optimism that new business and a stronger balance sheet should help with spinning off the logistics segment. The investment bank noted in a report that XPO has also been working with rating agencies to achieve investment grade by completion of the spinoff. XPO has reduced its debt balance by $1.2 billion and refinanced a $2 billion term loan in March, which lowered interest rates.
“Large contract wins and a continued lean into technology were the highlights of Q1,” Cowen analyst Jason Seidl wrote in the report. “Outlook is robust off a healthy pricing backdrop, continued strength in consumer and industrial trends, and margin expansion from digital initiatives.”
XPO ranks No. 2 on the Transport Topics Top 50 list of the largest logistics companies in North America and No. 3 on the Transport Topics Top 100 list of the largest for-hire carriers.
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