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Earnings Watch: XPO, Roadrunner Report Improved Earnings

November 2, 2016

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While many trucking operations have reported lower third quarter profits during this earnings season, there were two exceptions on Wednesday.

XPO Swings Into The Black

E-commerce and LTL business helped XPO Logistics Inc. (NYSE: XPO) move from a loss of $93.1 million in the third quarter of 2015, or 94 cents per share, to a profit of $13.8 million, or 11 cents per share, in the most recent three-month period.

Revenue moved sharply higher by 57.2% to $3.7 billion, as operating income more than tripled to $168.8 million from $44.1 million.

"We achieved this strong performance in a mixed operating environment,” said Bradley Jacobs, chairman and CEO. “In North America, vigorous demand from e-commerce drove growth in our contract logistics and last mile operations, while brokerage and intermodal were generally soft.”

He said the company’s less-than-truckload business in North America had another “outstanding quarter,” with higher yield and lower overhead costs. “This propelled a 40% increase in LTL operating income versus a year ago, pre-acquisition [of Con-way]. In Europe, where XPO is the market leader in e-fulfillment, we continued to win new business from major retailers based on our e-commerce expertise."

The company's transportation segment generated total revenue of $2.4 billion for the quarter, a 72.5% increase from the same period in 2015.  

The year-over-year increase in revenue was primarily due to the acquisition of Con-way on Oct. 30, 2015, and to organic growth, partially offset by lower fuel-related revenue, according to the company, and was led by last mile, primarily driven by an increase in e-commerce business. While XPO has retained Con-way’s LTL business, it sold off the truckload operations last week to Transforce in a more than $500 million deal.

Operating income for the transportation segment increased to $125.4 million, compared with operating income of $30.9 million a year ago.

XPO’s logistics segment generated total revenue of $1.3 billion for the quarter, a 35.6% increase from the same period in 2015.

The year-over-year hike was attributed to the Con-way acquisition and to organic growth. In Europe, sales growth was largely driven by new contract starts with e-commerce and cold-chain customers, but was more than offset by the adverse impact of unfavorable foreign exchange rates, according to the company. In North America, growth was largely driven by e-commerce and technology contracts, while traditional retail was weaker.

Operating income for the logistics segment was $75.3 million, up from $36 million a year ago.

XPO also updated its financial targets:

  • Full-year 2016 free cash flow of at least $175 million, as compared with the prior target of at least $150 million
  • Full-year 2017 adjusted EBITDA target of at least $1.35 billion. This target reflects a 17% increase over targeted full-year 2016 adjusted EBITDA of $1.15 billion, after excluding the North American truckload operation for the full year.

Roadrunner Transportation Earnings Jump More Than 30%

Profit for the asset-light trucking and logistics services provider Roadrunner Transportation Systems Inc. (NYSE: RRTS) increased by a healthy margin. It reported net income of $7.9 million, or 21 cents per share, compared to $5.8 million a year earlier, or 15 cents per share.

The Wisconsin-based fleet saw revenue increase to $532.2 million from $497.2 million for the same quarter in 2015. Operating income was $18.9 million, compared to $14.4 million for the prior year quarter. The gain in operating income included nearly $5 million from the sale of a non-core business and $2.1 million of downsizing costs.

This resulted in a 5-cent per share benefit for earnings, while another 8 cents per share in earnings is associated with the termination of certain independent contractor lease purchase guarantee programs.

“A large portion of the revenue increase related to our ground expedite business, in which we receive a management fee versus transportation or brokerage margins," said Mark DiBlasi, CEO. “Our remaining transportation businesses, when compared to the prior year, are experiencing continuing declines in freight rates and volumes across most end markets and lower fuel surcharge revenue, which declined by $7.4 million quarter-over-quarter.”

He said excess capacity and lower margins continued to hurt the company’s truckload business. Trends in its less-than-truckload segment remain mostly unchanged. He noted the company is feeling continued effects from weak freight demand in the general industrial markets Roadrunner serves and from lower fuel surcharge revenue.

“Our global solutions segment had revenue declines of $10.9 million during the third quarter of 2016, primarily due to a decrease in domestic transportation management and lower international freight forwarding volumes and rates, partially offset by increases in warehousing and consolidation,” DiBlasi said.

As a result, operating income of $7.1 million decreased $1.4 million in the third quarter of 2016 compared to the third quarter of 2015; however, it improved from the previous quarter when it totaled $6.7 million.

In an unusual move, Roadrunner pulled back on earlier guidance it offered for full year earnings, saying the company will not provide guidance until it’s clear that “market conditions and uncertainties have stabilized.”

You can read what kind of earnings other fleets have posted for the third quarter by following this link.

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