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Bull of the Day: XPO Logistics (XPO)

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Based in Greenwich, CT, XPO Logistics Inc. (XPO - Free Report) is athird-party logistics provider offering fast, single-source solutions for time-critical and service-sensitive shipments through its non-asset-based transportation network. XPO serves customers in the U.S., Canada, and Mexico with domestic and international freight destinations.

Q4 Earnings Recap

XPO recently reported solid fourth-quarter earnings results.

Revenue saw a double-digit year-over-year jump to $4.67 billion. Operating income grew in the double digits as well compared to the prior year quarter, to $228 million; diluted EPS was $0.91.

XPO generated $193 million of cash flow from operations, and $91 million of free cash flow, in Q4.

“Our fourth quarter revenue, earnings and free cash flow were all much better than expected. The investments we made in our people and technology in 2020 helped us to generate the highest revenue of any quarter in our history,” said CEO Brad Jacobs.

He continued, “The industry’s biggest tailwinds are at our back in 2021 — e-commerce fulfillment and returns, supply chain outsourcing and fast-growing customer demand for our digital capabilities.”

As for guidance, the company expects adjusted EBITDA between $1.725 billion and $1.8 billion for the fiscal year, which would represent growth of 24% and 29% year-over-year in each operating segment. Free cash flow is expected to be $600 million to $700 million.

XPO Breaks Out

XPO Logistics, Inc. Price and Consensus

 

In the past six months, shares of XPO have jumped over 44% compared to the S&P 500’s 17.5% increase. Earnings estimates have been rising too, and XPO is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, five analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 16 cents to $3.88 per share. Earnings are expected to grow 93% compared to the prior year period. Fiscal 2022 looks strong too, and earnings should see double-digit year-over-year growth as well.

Looking ahead, XPO is making some big growth plans. Management recently announced a plan to split its two main business segments, logistics and transportation, into separate publicly traded companies, a move that will boost earnings potential and shareholder returns in the future.

Investors can also expect XPO to capitalize on the e-commerce growth it was able to establish during the pandemic, as well as popular tech tools like XPO Connect, which is a digital marketplace that connects shippers and carriers to the company’s transportation network.

If you’re an investor searching for a transportation sector stock to add to your portfolio, make sure to keep XPO on your shortlist.

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