XPO Logistics Drives an Excellent Beat and Raise

By Markets Fool.com

Image source: XPO Logistics.

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XPO Logistics(NYSE: XPO) released better-than-expected second-quarter 2016 results Wednesday after the market close, and shares are up more than 15% as of this writing. It appears the company appeased recent concerns over how the recent Brexit vote might affect its business. Let's take a closer look at how the transportation and logistics specialist capped the first half of its year.

XPO Logistics results: The raw numbers

Metric

Q2 2016 Actuals

Q2 2015 Actuals

Growth (YOY)

Revenue

$3.68 billion

$1.22 billion

202.9%

GAAP net income (attributable to common shareholders)

$42.6 million

($75.1 million)

N/A

GAAP net income per diluted share

$0.35

($0.89)

N/A

Data source: XPO Logistics.

What happened with XPO Logistics this quarter?

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  • The increase in revenue was primarily due to acquisitions, including XPO's $3 billion purchase of Con-way late last year.
  • On an adjusted (non-GAAP) basis, which excludes $21.5 million ($13.9 million after tax) of one-time transaction-related and rebranding costs, net income was $50.4 million, or $0.42 per share, compared to an adjusted net loss of $13.6 million, or $0.16 per share in last year's second quarter.
  • Adjusted earnings before interest, taxes, depreciation and amortization was $354.9 million, up from $79.7 million in the same year-ago period.
  • Generated cash flow from operations of $260.7 million, and free cash flow of $169.5 million.
  • By segment:
    • Transportation revenue jumped 180.9% year over year, to $2.4 billion, driven by acquisitions but also helped by growth in last mile and truck brokerage. Transportation operating income was $153.2 million, and adjusted EBITDA was $275.7 million.
    • Logistics revenue rose 270.4%, to $1.3 billion, with operating income of $51.1 million, and adjusted EBITDA of $106.9 million. Adjusted EBITDA was higher than expected in logistics thanks to volume increases from e-commerce, high tech, and overall strength in Europe.
    • Corporate sales, general, and administrative expenses were $34 million, down from $57.4 million in last year's second quarter due to lower one-time transaction-related costs.
  • Launched next-generation website at xpo.com, with a new tag line ("Results Matter"), enhanced functionality connecting customers with transportation and logistics experts, and more information about XPO's relative efficiency managing customers' goods throughout their supply chains.

What management had to say

XPO Logistics CEO Bradley Jacobs noted adjusted EBITDA, cash flow from operations, and free cash flow all set new company records, calling this quarter an "inflection point in the evolution of our business,accelerating our EBITDA and cash generation while continuing to invest in technology, our sales force, and other levers of future growth."

Jacobs elaborated:

Our strong performance in the quarter was led by our North American operations for last mile and less-than-truckload, and by our European supply chain operations. While market conditions were sluggish overall, e-commerce was a major tailwind-driving margin expansion in last mile, and resulting in major contract wins in contract logistics on both sides of the Atlantic. In LTL, we increased operating income by 66% from last year's second quarter, pre-acquisition.

Looking forward

Consequently, XPO also increased its2016 financial targets, and now expects adjusted EBITDA of at least $1.265 billion (up from previous guidance of $1.25 billion), and free cash flow of at least $150 million (up $100 million to $150 million). In addition, Jacobs believes XPO continues to have a "well-defined path" to its target of reaching 2018 EBITDA of $1.7 billion, especially as $300 million of XPO's profit improvement is company-specific and independent of macroeconomic conditions.

Given XPO's relative strength following last year's big acquisition, its encouraging forward guidance, and with shares still nearly 30% below their 52-week-high, I think investors have every reason to celebrate today.

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Steve Symington has no position in any stocks mentioned. The Motley Fool recommends XPO Logistics. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.