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XPO, Inc. (XPO)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered mixed headline results: revenue $1.954B (-3.2% YoY), GAAP diluted EPS $0.58 (+3.6% YoY), adjusted diluted EPS $0.73 (-9.9% YoY), and adjusted EBITDA $278M (-3.5% YoY) .
  • LTL execution was the clear positive: adjusted operating ratio improved sequentially to 85.9% (+30 bps vs Q4), yield ex-fuel up 6.9% YoY, revenue per shipment up for the 9th straight quarter, and purchased transportation down 53% YoY; management highlighted record service quality and AI-driven cost/productivity gains .
  • Versus Street: XPO posted an EPS beat (Adjusted/Primary EPS $0.73 vs $0.65), EBITDA beat ($278M vs $272M), and slight revenue miss ($1.954B vs $1.976B); Q3 and Q4 were beats across EPS, revenue, and EBITDA (see Estimates Context) (Values retrieved from S&P Global).
  • Guidance/tone: management reiterated a full-year LTL margin plan of +150 bps YoY even with negative tonnage; downside scenario still targets ~+100 bps. Q2 sequential OR improvement expected “at or above” the high end of the typical +250–300 bps range—key near-term stock catalyst alongside continued yield strength and cost insourcing .
  • Capital allocation adds support: authorized a $750M share repurchase, liquidity of ~$811M, and net leverage improved to 2.5x TTM adjusted EBITDA; opportunistic buybacks expected to commence in 2025 .

What Went Well and What Went Wrong

What Went Well

  • Yield/pricing and service quality: “We accelerated first quarter yield growth, excluding fuel, to 6.9% and improved revenue per shipment sequentially for the ninth consecutive quarter,” underpinned by record service quality and AI-enabled productivity gains .
  • Cost structure improvement: purchased transportation expense fell 53% YoY; outsourced linehaul miles declined to 8.8% of total miles, with mid-single-digit target by year-end, unlocking incremental margins when demand recovers .
  • Operating discipline and margin trajectory: LTL adjusted OR improved to 85.9% (+30 bps sequential), bringing cumulative improvement to 370 bps over two years in a soft market (management reiterated long runway for margin expansion) .

What Went Wrong

  • Top-line pressure: revenue down 3.2% YoY, driven largely by lower fuel surcharge revenue; LTL tonnage per day down 7.5% and shipments per day down 5.8% YoY .
  • Non-GAAP compression: adjusted diluted EPS fell to $0.73 (from $0.81) and adjusted EBITDA dipped to $278M (from $288M), reflecting lower fuel surcharge revenue, lower tonnage, and pension income headwinds .
  • Europe softness: European Transportation adjusted EBITDA declined 15.8% YoY; while operating income turned positive, segment profitability remained pressured, albeit with some sequential improvement trends noted on the call .

Financial Results

Consolidated performance vs prior quarters

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$2,053 $1,921 $1,954
Operating Income ($USD Millions)$176 $148 $151
Diluted EPS ($USD)$0.79 $0.63 $0.58
Adjusted Diluted EPS ($USD)$1.02 $0.89 $0.73
Adjusted EBITDA ($USD Millions)$333 $303 $278
Adjusted EBITDA Margin (%)16.2% 15.8% 14.2%
Cash Flow from Operating Activities ($USD Millions)$264 $189 $142

YoY comparison (Q1 2025 vs Q1 2024)

MetricQ1 2024Q1 2025
Revenue ($USD Millions)$2,018 $1,954
Operating Income ($USD Millions)$138 $151
Net Income ($USD Millions)$67 $69
Diluted EPS ($USD)$0.56 $0.58
Adjusted Diluted EPS ($USD)$0.81 $0.73
Adjusted EBITDA ($USD Millions)$288 $278

Segment performance

Segment MetricQ3 2024Q4 2024Q1 2025
LTL Revenue ($USD Millions)$1,251 $1,156 $1,172
LTL Adjusted Operating Ratio (%)84.2% 86.2% 85.9%
LTL Adjusted EBITDA ($USD Millions)$284 $280 $250
Europe Revenue ($USD Millions)$803 $765 $782
Europe Adjusted EBITDA ($USD Millions)$44 $27 $32
Corporate Adjusted EBITDA ($USD Millions)$5 $(4) $(4)

LTL KPIs

KPIQ3 2024Q4 2024Q1 2025
Shipments per Day51,921 49,109 48,400
Pounds per Day (thousands)69,470 65,433 65,427
Revenue per Shipment (ex fuel) ($)$319.75 $325.62 $325.74
Gross Revenue per CWT (ex fuel) ($)$24.34 $24.84 $24.73
Avg Length of Haul (miles)855.7 854.7 845.6
LTL Purchased Transportation ($USD Millions)$58 $44 $37

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
LTL OR Improvement (YoY)FY 2025+150 bps with flat tonnage (Feb guide referenced) +150 bps even with negative tonnage Maintained
LTL OR Improvement (YoY) downsideFY 2025N/A~+100 bps if full-year tonnage down mid-single digits New downside scenario
LTL OR Sequential ImprovementQ2 2025Typical +250–300 bps At or above high end of range Raised vs typical seasonality
Gross CapexFY 2025N/A$600–$700M New planning assumption
Interest ExpenseFY 2025N/A$220–$230M New planning assumption
Pension IncomeFY 2025N/A≈$6M New planning assumption
Adjusted Effective Tax RateFY 2025N/A24%–25% New planning assumption
Diluted Share CountFY 2025N/A120M New planning assumption
Share Repurchase Authorization2025N/A$750M authorization; opportunistic execution New authorization

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/TechnologyProprietary tech improved variable cost management Leveraged proprietary tech to improve labor productivity New AI apps in linehaul optimization, labor planning, and P&D; beta testing; improving load averages and transit efficiencies Expanding deployment, deeper impact
Pricing/YieldYield ex-fuel +6.7% YoY Yield ex-fuel +6.3% YoY Yield ex-fuel +6.9% YoY; renewals up mid- to high-single digits Accelerating
Linehaul InsourcingAhead of plan on insourcing Outsourced miles at best level historically Outsourced miles 8.8%; target mid-single digits by YE Improving structurally
Service Quality/ClaimsStrong service cited Record service levels Damage claims ratio ~0.3% (record low); 12th straight YoY on-time improvement Sustained improvement
Macro/TariffsSoft freight backdrop —Cautious customer tone; flattish demand expectation; tariff uncertainty More cautious
Local SMB mix——Local channel tonnage grew mid–high single digits in Q1; double-digit in April; goal to reach ~30% of revenue (low–mid 20s today) Growing mix and margin
Europe segmentYoY revenue growth, flat EBITDA YoY EBITDA down Constant-currency revenue up for 5th consecutive quarter; sequential EBITDA +19%; UK EBITDA up double-digits YoY Sequentially improving

Management Commentary

  • “We accelerated first quarter yield growth, excluding fuel, to 6.9% and improved revenue per shipment sequentially for the ninth consecutive quarter, underpinned by record service quality.”
  • “We lowered our purchase transportation costs by 53% year-over-year and reduce our outsourced linehaul miles to just 8.8% of total miles… By year-end, we expect to reduce outsourced miles even further into the mid-single digits.”
  • “Based on our performance year-to-date, we do expect to deliver 150 basis points of year-on-year margin improvement… If volumes are down mid-single digits for the full year, we still expect to improve OR by about 100 basis points.”
  • “We generated $142 million of cash flow from operating activities… ended the quarter with $212 million of cash on hand… $811 million of liquidity… net debt leverage ratio at quarter end was 2.5x.”
  • “Recently, we announced… repurchase of up to $750 million… We expect to begin opportunistically repurchasing shares this year.”

Q&A Highlights

  • Margin outlook and seasonality: Management expects Q2 LTL OR sequential improvement “at or above” +300 bps on strong yield and cost control; full-year plan remains +150 bps OR even with negative tonnage, with ~+100 bps in a softer scenario .
  • Volume trajectory: Tonnage down 7.5% YoY in Q1; monthly cadence improved (Jan -8.5%, Feb -8.1%, Mar -6.0%, Apr estimated -5.7%), with easier comps in 2H; tariffs add uncertainty .
  • Pricing dynamics: Contract renewals mid–high single digits; management expects yield ex-fuel to improve sequentially through 2025, supported by premium services and SMB mix .
  • Competitive/industry chatter: UPS/Amazon moves viewed as non-material to traditional LTL given weight/profile; industry capacity remains constrained, setting up stronger operating leverage in an upcycle .
  • Capital allocation: $750M buyback authorization; deleveraging continues toward 1–2x long-term; CapEx to moderate from 2024 highs as network build-out normalizes .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
Primary EPS Consensus Mean$0.901*$0.629*$0.651*
Primary EPS Actual$1.02*$0.89*$0.73*
Revenue Consensus Mean ($USD Millions)$2,017*$1,916*$1,976*
Revenue Actual ($USD Millions)$2,053*$1,922*$1,954*
EBITDA Consensus Mean ($USD Millions)$316*$268*$272*
EBITDA Actual ($USD Millions)$318*$289*$276*

Values retrieved from S&P Global.

  • Q1 2025: EPS and EBITDA beats; slight revenue miss vs consensus. Q4 and Q3 were broad beats across all three metrics (S&P Global).
  • Implications: Street likely raises margin/EPS trajectories (supported by yield momentum, insourcing and Q2 OR guidance), while acknowledging softer volume and fuel surcharge revenue headwinds; Europe assumptions may reflect sequential improvement but cautious macro tone .

Key Takeaways for Investors

  • LTL margin story intact and accelerating: sequential OR improvement and sustained yield/premium mix should support earnings resilience through macro softness .
  • Cost insourcing is a durable advantage: 8.8% outsourced linehaul miles with a path to mid-single digits enhances incremental margins in an upcycle .
  • Near-term catalysts: potential Q2 OR outperformance vs seasonality and continued yield gains; monitor monthly LTL operating updates for volume cadence .
  • Capital returns: $750M buyback authorization with improving leverage and moderated CapEx offers an additional support to EPS and valuation .
  • Watch Europe: sequential EBITDA improvement and constant-currency revenue growth are constructive, but YoY comps remain pressured; execution remains key .
  • Risk factors: tariff-related uncertainty, lower fuel surcharge revenue, and macro-sensitive industrial demand; management’s plan focuses on levers they control (pricing, productivity, insourcing) .
  • Positioning: A service-led LTL operator with AI-enabled productivity and capacity investments that should compound margin expansion over multi-years (2021–2027 targets reinforce thesis) .

Appendix: Non-GAAP Adjustments (Q1 2025)

  • Adjusted net income reconciles GAAP net income $69M for debt extinguishment loss ($5M), amortization ($14M), European legal matter (-$11M), transaction/integration ($3M), restructuring ($12M), tax effects (-$5M), and legal entity reorg (+$1M) to adjusted net income $87M and adjusted diluted EPS $0.73 .