XPO’s third-quarter results came in ahead of expectations on Thursday before the market opened. Efficiency initiatives and higher yields pushed operating income higher at the Greenwich, Connecticut-based company’s less-than-truckload segment.
XPO (NYSE: XPO) reported adjusted earnings per share of $1.07 for the quarter, 5 cents higher than consensus and the year-ago result. The adjusted EPS number excluded transaction and restructuring costs. It also excluded a previously disclosed charge of $35 million stemming from environmental and product liability claims at a truck manufacturing subsidiary of Con-way, which XPO acquired in 2015.
Consolidated revenue was up 3% y/y at $2.11 billion, which was ahead of the $2.07 billion consensus estimate.
Table: XPO’s key performance indicators
Less-than-truckload revenue increased slightly y/y to $1.26 billion as a 6% decline in tonnage per day was offset by a 6% increase in revenue per hundredweight, or yield. The tonnage decline was due to the combination of a 3.5% decline in daily shipments and a 2.7% dip in weight per shipment.
Tonnage was off in the period even as the prior-year comps have eased. But the company has been improving its freight mix, which is pushing yields higher. Yield (excluding fuel surcharges) is up 12.6% on a two-year-stacked comparison.
Both length of haul (up 1.3%) and lower shipment weights were supportive of the yield metric.
SONAR: Longhaul LTL Monthly Cost per Hundredweight, Class 125+ Index. Less-than-truckload monthly indices are based on the median cost per hundredweight for four National Motor Freight Classification groupings and five different mileage bands. To learn more about SONAR, click here.
The LTL unit reported an 82.7% adjusted operating ratio (inverse of operating margin), 150 basis points better y/y and 20 bps better than the second quarter. The result was ahead of management’s guidance, calling for no sequential change. (XPO normally sees 200 to 250 bps of OR degradation from the second to the third quarter).
“Our intense execution is resulting in record service quality and margin expansion at the trough of the cycle,” CEO Mario Harik said in a news release. “We’re in the early innings of realizing our long-term margin opportunity, and we expect performance to accelerate as our strategy continues to gain traction.”
XPO’s European transportation segment reported a 7% y/y increase in revenue to $857 million, but an operating loss of $2 million was an $8 million y/y swing. Adjusted EBITDA of $38 million was down 14% y/y.
XPO will host a call to discuss third-quarter results on Thursday at 8:30 a.m. EDT.
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