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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.

Q1 Earnings Recap

XPO recently reported very strong first-quarter earnings results.

Revenue jumped 24% year-over-year to $4.8 billion, which is the highest quarterly revenue total in the company’s history. Earnings per share of $1.46 came in well above the consensus estimate of $0.97 per share.

XPO generated $173 million of cash flow from operations, and $69 million of free cash flow, in Q1.

“In sum, our business has been firing on all cylinders… Our results not only reflect strong execution throughout our operations, they also underscore how our businesses are strategically well positioned to meet customers' needs and capture profitable growth opportunities in logistics, LTL and brokerage,” said CFO David Wyshner.

As for guidance, the company expects adjusted EBITDA between $1.825 billion and $1.875 billion for the fiscal year, with growth of 28% to 32% in XPO’s logistics segment and 30% to 34% in its transportation segment. Free cash flow is expected to be in the range of $650 million to $725 million.

XPO Breaks Out

In the past six months, shares of XPO have jumped 38% compared to the S&P 500’s 15.7% increase. Earnings estimates have been rising too, and XPO is a Zacks Rank #1 (Strong Buy) right now.

For fiscal 2021, 11 analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 82 cents to $6.08 per share. Earnings are expected to grow over 200% compared to the prior year period. Fiscal 2022 looks strong too, and earnings should see positive year-over-year growth as well.

Looking ahead, XPO is making some big growth plans. Management is making progress toward its 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 continue 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.

Wall Street is getting excited about XPO’s potential too. Barclays upgraded XPO to overweight from equal weight back in April, and other brokerage firms have recently boosted their price targets on the stock.

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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