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XPO, Inc. (XPO)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered EPS growth and margin expansion despite a slight revenue decline: revenue $1.921B vs $1.940B (-1.0% YoY), GAAP diluted EPS $0.63 vs $0.49 (+28.6% YoY), adjusted diluted EPS $0.89 vs $0.77 (+15.6% YoY) .
  • LTL margin execution remained a standout: adjusted operating ratio of 86.2% (improved 30bps YoY), with yield ex-fuel up 6.3% and revenue per shipment ex-fuel up 5.8% .
  • 2025 guidance introduced: baseline LTL OR improvement of 150bps for FY25; Q1 yield growth expected to accelerate vs Q4’s +6.3% ex-fuel, and sequential OR improvement expected from Q4 to Q1; planning assumptions include CapEx $600–$700M, interest expense $220–$230M, adjusted tax rate 24–25%, pension income ~$6M, diluted shares ~120M .
  • Strategic catalysts: record service levels, deep linehaul insourcing (outsourced miles reduced to 10.7% in Q4, targeting single digits in 2025), premium services mix, and local-customer growth (10,000+ new local accounts in 2024) position XPO to capture operating leverage in an upcycle .

What Went Well and What Went Wrong

  • What Went Well

    • LTL yield momentum and pricing power: “we grew yield excluding fuel by 7.8% YoY…directly contributing to 260bps of OR improvement; premium services contributed to above-market yield growth” .
    • Cost efficiency through linehaul insourcing: outsourced linehaul miles cut to 10.7% in Q4, with a path to single digits in 2025, insulating margins when truckload rates rise .
    • Network capacity and service excellence: 25 new service centers integrated; damage claims ratio at 0.2% and on-time performance better YoY for the 11th consecutive quarter .

  • What Went Wrong

    • Topline pressures from lower fuel surcharge revenue: total revenue down 1.0% YoY; LTL revenue down 2.6% YoY primarily due to fuel surcharge declines .
    • European Transportation softness: Q4 operating loss of $11M vs $2M loss in prior-year; adjusted EBITDA down to $27M from $36M .
    • Volume headwinds and seasonality: Q4 LTL tonnage/day -5.7% YoY; management flagged January tonnage down ~8.5% YoY with 3pts weather impact, and typical Q1 seasonality in tonnage and OR .

Financial Results

Quarterly trend (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$2.079 $2.053 $1.921
Operating Income ($USD Millions)$197 $176 $148
Adjusted EBITDA ($USD Millions)$343 $333 $303
Adjusted EBITDA Margin (%)16.5% 16.2% 15.8%
Diluted EPS ($USD)$1.25 $0.79 $0.63
Adjusted Diluted EPS ($USD)$1.12 $1.02 $0.89
Cash from Operations ($USD Millions)$210 $264 $189
Cash & Equivalents ($USD Millions, period-end)$250 $378 $246

YoY comparison (Q4 2024 vs Q4 2023)

MetricQ4 2023Q4 2024YoY Change
Revenue ($USD Billions)$1.940 $1.921 -1.0%
Operating Income ($USD Millions)$119 $148 +24.4%
Adjusted EBITDA ($USD Millions)$264 $303 +14.8%
Adjusted EBITDA Margin (%)13.6% 15.8% +220 bps
Diluted EPS ($USD)$0.49 $0.63 +28.6%
Adjusted Diluted EPS ($USD)$0.77 $0.89 +15.6%

Segment breakdown (Q4 2024)

SegmentRevenue ($USD Millions)Operating Income (Loss) ($USD Millions)Adjusted Operating Income ($USD Millions)Adjusted EBITDA ($USD Millions)
North American LTL$1,156 $179 $159 $280
European Transportation$765 $(11) $(2) $27
Corporate— $(19) NA $(4)
Total$1,921 $148 NA $303

Key LTL KPIs

KPIQ2 2024Q3 2024Q4 2024
Shipments per day53,519 51,921 49,109
Pounds per day (000s)72,658 69,470 65,433
Avg weight per shipment (lbs)1,358 1,338 1,332
Revenue per shipment (incl. fuel) ($)370.98 379.00 382.32
Revenue per shipment (ex. fuel) ($)310.24 319.75 325.62
GRPH (incl. fuel) ($)28.04 28.77 29.09
GRPH (ex. fuel) ($)23.56 24.34 24.84
Avg length of haul (miles)847.8 855.7 854.7
Tractor fleet age (years)4.0 4.2 4.1
Adjusted OR (%)83.2 84.2 86.2

Notes:

  • Q4 adjusted EBITDA includes a pre-tax $34M real estate gain ($26M after-tax; ~$0.21 per diluted share) tied to a planned service center relocation .
  • Q4 LTL revenue decline was primarily due to lower fuel surcharge revenue; yield ex-fuel rose 6.3% YoY .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
LTL Adjusted OR ImprovementFY 2025Not providedBaseline +150 bpsIntroduced
Q1 Yield Growth (ex-fuel)Q1 2025Not providedExpected to accelerate vs Q4’s +6.3%Introduced/Raised near-term outlook
Q1 Sequential ORQ1 2025Normal deterioration ~50bpsExpect to outperform seasonality; OR to improve sequentially from Q4Raised vs seasonality
Gross CapExFY 2025Not provided$600–$700MIntroduced
Interest ExpenseFY 2025Not provided$220–$230MIntroduced
Pension IncomeFY 2025Not provided~$6MIntroduced
Adjusted Effective Tax RateFY 2025Not provided24–25%Introduced
Diluted Share CountFY 2025Not provided~120M sharesIntroduced
Real Estate Gains/ProceedsFY 2025Not quantifiedExpect some proceeds/gains; timing/amount TBDIntroduced
DividendFY 2025Not providedNot announcedN/A in materials

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Pricing/YieldQ2: Yield ex-fuel +9.0%; adjusted OR 83.2% (+440bps YoY) • Q3: Yield ex-fuel +6.7%; adjusted OR 84.2% (+200bps YoY) Yield ex-fuel +6.3%; sequential improvement vs Q3; pricing initiatives/premium services supporting acceleration in Q1 Positive, accelerating near-term
Linehaul InsourcingAhead of plan; reduced purchased transportation Outsourced miles at 10.7% in Q4; targeting single digits in 2025 Structural margin lever strengthening
Service QualityRecord damage claims ratio 0.2%; on-time performance improving Damage frequency improved to company records; on-time better YoY for 11th straight quarter Sustained record service
Network Capacity14/28 service centers opened by Q2; capacity investments 25 service centers integrated; ~30% excess door capacity entering 2025 Capacity in place for upcycle
EuropeQ3 revenue +6.8% YoY; mixed profitability Q4 revenue +1.6% YoY; operating loss; U.K. double-digit organic growth Topline resilience; profitability mixed
AI/TechnologyProprietary tools driving labor productivity Predictive AI aligning labor hours; continued productivity gains Increasing operational impact

Management Commentary

  • “We delivered our strongest year of LTL margin improvement since 2016…positioned the business to capitalize quickly in a freight market recovery” — Mario Harik (CEO) .
  • “We reduced outsourced miles to 10.7% of total miles…expect this to drop into single digits this year” — Mario Harik (CEO) .
  • “We expect total company gross CapEx of $600–$700 million, interest expense of $220–$230 million…adjusted effective tax rate of 24–25%” — Kyle Wismans (CFO) .
  • “We do expect our yield growth to accelerate in the first quarter…we also expect OR to improve sequentially from Q4 to Q1” — Ali-Ahmad Faghri (Chief Strategy Officer) .

Q&A Highlights

  • LTL OR trajectory: baseline expectation for FY25 OR improvement of 150bps; potential upside if demand inflects; plan driven by yield, premium services, local mix, labor/productivity, linehaul insourcing .
  • Yield acceleration and sequential margin: Q1 yield expected to accelerate from Q4’s +6.3% ex-fuel; management expects sequential OR improvement vs typical seasonal deterioration .
  • Local customer strategy: grow mix from ~low-20% to 30%+ over time; higher-yielding/higher-margin; 10,000+ new local accounts in 2024 .
  • CapEx normalization: LTL CapEx to moderate a few points from 2024’s 14.6% of revenue; typical split ~50% fleet, ~40% land/buildings, remainder equipment/IT .
  • Classification changes (NMFTA): dimensioning broadly in place; expect minimal pricing impact; supporting customers through transition .

Estimates Context

  • Consensus estimates from S&P Global (EPS, revenue, EBITDA, target price, and estimate counts) were unavailable at the time of analysis due to an SPGI request limit error. As a result, we cannot definitively classify Q4 as a beat/miss versus Wall Street consensus at this time. We will update this section when S&P Global data access is restored.

Key Takeaways for Investors

  • LTL margin engine intact: sequential OR improvement expected in Q1 and baseline +150bps for FY25 suggests continued earnings momentum even in a soft macro backdrop .
  • Pricing power visible: yield ex-fuel growth (+6.3% in Q4) and planned acceleration in Q1 reflect service-led pricing and premium mix that should sustain margin expansion .
  • Cost structure resilient: linehaul insourcing to single digits and younger fleet lower cost/mile, positioning XPO for higher incremental margins in an upcycle .
  • Capacity to capture upside: ~30% excess door capacity and integrated service centers enable rapid volume onboarding when demand recovers .
  • Europe mixed but stable: top-line growth continues despite macro headwinds; UK strength offsets softness elsewhere, with focus on cost control .
  • Non-GAAP real estate gains helped Q4 EBITDA; management excludes such gains from OR guidance, implying core margin improvement remains the focus .
  • Near-term trading implication: watch monthly operating updates and Q1 yield/OR progression; confirmation of yield acceleration and sequential OR improvement could catalyze positive estimate revisions and sentiment. Medium term: execution on local/premium mix and insourcing underpins multi-year margin trajectory .