[Q2 2025 Financial Highlights](index=1&type=section&id=XPO%20Reports%20Second%20Quarter%202025%20Results) XPO reported stable Q2 2025 revenue of $2.08 billion, with net income down 29.3% to $106 million, while adjusted metrics exceeded expectations [Overall Performance](index=1&type=section&id=Second%20Quarter%202025%20Summary%20Results) XPO reported stable Q2 2025 revenue of $2.08 billion, with net income down 29.3% to $106 million, while adjusted metrics exceeded expectations Q2 2025 Consolidated Financial Summary (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $2,080M | $2,079M | 0.0% | | Operating Income | $198M | $197M | 0.5% | | Net Income | $106M | $150M | -29.3% | | Adjusted EBITDA | $340M | $343M | -0.9% | | Diluted EPS | $0.89 | $1.25 | -28.8% | | Adjusted Diluted EPS | $1.05 | $1.12 | -6.3% | - CEO Mario Harik stated that the company delivered strong results, with adjusted EBITDA of **$340 million** and adjusted diluted EPS of **$1.05** both exceeding expectations[6](index=6&type=chunk) - The company generated **$247 million** in cash flow from operating activities and ended the quarter with **$225 million** in cash and cash equivalents after **$191 million** in net capital expenditures[11](index=11&type=chunk) [Segment Performance](index=2&type=section&id=Results%20by%20Business%20Segment) The North American LTL segment saw slight revenue decline but improved operating ratio, while European Transportation grew revenue but declined in adjusted EBITDA [North American Less-Than-Truckload (LTL)](index=2&type=section&id=North%20American%20Less-Than-Truckload%20(LTL)) The North American LTL segment's revenue decreased 2.5% to $1.24 billion due to lower tonnage, yet achieved an industry-best adjusted operating ratio of 82.9% North American LTL Q2 2025 Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $1,240M | $1,272M | -2.5% | | Adjusted Operating Income | $211M | $214M | -1.4% | | Adjusted EBITDA | $300M | $297M | 1.0% | | Adjusted Operating Ratio | 82.9% | 83.2% | -30 bps | - Key operational changes year-over-year include a **6.7% decrease** in tonnage per day and a **5.1% decrease** in shipments per day[12](index=12&type=chunk) - The company achieved strong pricing with a **6.1% increase** in yield (excluding fuel) and a **5.6% increase** in revenue per shipment, driven by a world-class service culture and share gains with local customers[7](index=7&type=chunk) - Cost management was effective, with purchased transportation expense reduced by **53%** year-over-year as the company insourced a record level of linehaul miles[7](index=7&type=chunk) [European Transportation](index=2&type=section&id=European%20Transportation) The European Transportation segment reported a 4.1% increase in revenue to $841 million, but adjusted EBITDA declined by 10.2% European Transportation Q2 2025 Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $841M | $808M | 4.1% | | Operating Income | $11M | $10M | 10.0% | | Adjusted EBITDA | $44M | $49M | -10.2% | [Corporate](index=3&type=section&id=Corporate) The Corporate segment's operating loss improved to $11 million from $16 million, primarily due to reduced transaction and integration costs Corporate Q2 2025 Performance (vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change % | | :--- | :--- | :--- | :--- | | Operating Loss | ($11M) | ($16M) | -31.3% | | Adjusted EBITDA | ($4M) | ($3M) | 33.3% | - The improvement in operating loss was mainly due to a reduction in transaction and integration costs[14](index=14&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents XPO's consolidated statements of income, balance sheets, and cash flows for the reported periods [Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the six months ended June 30, 2025, XPO's revenue decreased 1.5% to $4.03 billion, while net income fell 19.4% to $175 million Six Months Ended June 30, 2025 vs 2024 | Metric | 6M 2025 | 6M 2024 | Change % | | :--- | :--- | :--- | :--- | | Revenue | $4,034M | $4,097M | -1.5% | | Operating Income | $349M | $335M | 4.2% | | Net Income | $175M | $217M | -19.4% | | Diluted EPS | $1.47 | $1.81 | -18.8% | - Key expense changes for the six-month period include a **5.5% decrease** in purchased transportation costs and a **76.9% decrease** in transaction and integration costs, while restructuring costs rose **42.9%**[27](index=27&type=chunk) [Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, XPO's total assets increased to $8.13 billion, driven by property and equipment, while total equity grew to $1.78 billion Balance Sheet Summary | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $225M | $246M | | Total Assets | $8,133M | $7,712M | | Long-term debt | $3,344M | $3,325M | | Total Liabilities | $6,352M | $6,110M | | Total Equity | $1,781M | $1,601M | [Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first six months of 2025, the company generated $389 million in net cash from operating activities, with a net decrease in cash of $65 million Cash Flow Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $389M | $355M | | Net cash used in investing activities | ($382M) | ($483M) | | Net cash used in financing activities | ($74M) | ($35M) | | Net decrease in cash | ($65M) | ($162M) | [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section explains XPO's use of non-GAAP financial measures and provides reconciliations to GAAP equivalents [Explanation of Non-GAAP Measures](index=3&type=section&id=Explanation%20of%20Non-GAAP%20Measures) XPO uses non-GAAP measures like adjusted EBITDA and net income to provide a clearer analysis of core operations by excluding non-recurring items - The company uses non-GAAP measures to exclude items that may not be reflective of, or are unrelated to, core operating performance[19](index=19&type=chunk) - Key non-GAAP measures include: **adjusted EBITDA**, **adjusted net income**, **adjusted diluted EPS**, **adjusted operating income**, and **adjusted operating ratio**[18](index=18&type=chunk) - Adjustments typically include transaction and integration costs, restructuring costs, and amortization of acquisition-related intangible assets[20](index=20&type=chunk)[21](index=21&type=chunk) [Reconciliation of Net Income to Adjusted EBITDA](index=13&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) For Q2 2025, XPO reconciled its net income of $106 million to an adjusted EBITDA of $340 million, primarily by adding back depreciation, interest, and tax provisions Q2 2025 Reconciliation of Net Income to Adjusted EBITDA | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $106M | $150M | | Interest expense | $56M | $56M | | Income tax provision (benefit) | $37M | ($3M) | | Depreciation and amortization | $131M | $122M | | Transaction & integration costs | $3M | $12M | | Restructuring costs | $8M | $6M | | **Adjusted EBITDA** | **$340M** | **$343M** | [Reconciliation of Net Income to Adjusted Net Income and EPS](index=14&type=section&id=Reconciliation%20of%20Net%20Income%20and%20Diluted%20Earnings%20Per%20Share%20to%20Adjusted%20Net%20Income%20and%20Adjusted%20Earnings%20Per%20Share) In Q2 2025, net income of $106 million ($0.89 per diluted share) was reconciled to an adjusted net income of $125 million ($1.05 per diluted share) Q2 2025 Reconciliation to Adjusted Net Income and EPS | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $106M | $150M | | Amortization of acquisition-related intangible assets | $15M | $14M | | Transaction & integration costs | $3M | $12M | | Restructuring costs | $8M | $6M | | European legal entity reorganization | - | ($41M) | | **Adjusted net income** | **$125M** | **$135M** | | **Adjusted diluted EPS** | **$1.05** | **$1.12** | [Other Information](index=3&type=section&id=Other%20Information) This section provides important disclosures regarding forward-looking statements and company contact information [Forward-Looking Statements](index=4&type=section&id=Forward-looking%20Statements) The report contains forward-looking statements subject to various risks and uncertainties, and actual results may differ materially from expectations - Statements that are not historical facts are considered forward-looking and are based on management's current assumptions and analysis[22](index=22&type=chunk) - Key risks include economic impacts, supply chain issues, cost inflation, ability to implement revenue initiatives, competition, and fluctuations in currency and fuel prices[23](index=23&type=chunk) [Company Overview and Conference Call](index=3&type=section&id=About%20XPO) XPO, Inc. is a leading North American LTL freight transportation provider, with a conference call scheduled for July 31, 2025, to discuss results - XPO is a leader in asset-based LTL freight transportation in North America, serving **55,000 customers** and headquartered in Greenwich, Conn., USA[16](index=16&type=chunk) - A conference call to discuss the quarterly results is scheduled for **July 31, 2025**, at **8:30 a.m. Eastern Time**[15](index=15&type=chunk)

Core Insights - XPO reported diluted earnings per share of $0.89 for Q2 2025, down from $1.25 in Q2 2024, and adjusted diluted earnings per share of $1.05, down from $1.12 in the same period last year [1][7][8] - The company generated total revenue of $2.08 billion, unchanged from Q2 2024, with operating income slightly increasing to $198 million from $197 million [6][7][8] - Net income decreased by 29.3% to $106 million compared to $150 million in Q2 2024, primarily due to a one-time tax benefit in the previous year [7][8] Financial Performance - North American Less-Than-Truckload (LTL) segment revenue was $1.24 billion, a decrease of 2.5% from $1.27 billion in Q2 2024, with operating income at $199 million, down from $203 million [10][12] - European Transportation segment revenue increased by 4.1% to $841 million, with operating income rising to $11 million from $10 million [12][41] - Adjusted EBITDA for the total company was $340 million, slightly down from $343 million in Q2 2024, reflecting yield growth and lower transportation costs [8][11][49] Operational Highlights - In the North American LTL business, the adjusted operating ratio improved by 30 basis points to 82.9%, despite a decline in tonnage [5][10] - Yield, excluding fuel, increased by 6.1%, and revenue per shipment rose by 5.6% year-over-year [5][10] - The company achieved a 53% reduction in purchased transportation expenses by insourcing linehaul miles to a record level [5] Cash Flow and Capital Expenditures - XPO generated $247 million in cash flow from operating activities in Q2 2025, ending the quarter with $225 million in cash and cash equivalents after $191 million in net capital expenditures [9][30]

Core Viewpoint - The upcoming earnings report for XPO is expected to show a decline in both earnings per share and revenue compared to the previous year, indicating a downward trend in financial performance [1]. Financial Performance - Analysts predict quarterly earnings of $0.99 per share, reflecting an 11.6% decline year-over-year [1]. - Revenue is forecasted to be $2.04 billion, which represents a 1.8% decrease compared to the same quarter last year [1]. - The consensus EPS estimate has been revised downward by 3.9% over the past 30 days, indicating a reappraisal by analysts [1]. Segment Performance - Revenue for the European Transportation Segment is expected to reach $793.91 million, down 1.7% from the prior-year quarter [4]. - The North American Less-Than-Truckload Segment is projected to generate $1.24 billion in revenue, reflecting a year-over-year decline of 2.3% [4]. - The Adjusted Operating Ratio is anticipated to be 82.9%, slightly improved from 83.2% reported in the same quarter last year [4]. Key Metrics - The number of working days is expected to remain at 64, consistent with the previous year [5]. - Shipments per day are forecasted to be 50,737, down from 53,519 in the year-ago period [5]. - Gross revenue per hundredweight (excluding fuel surcharges) is estimated at $25.16, up from $23.56 a year ago [5]. - Gross revenue per hundredweight (including fuel surcharges) is projected to be $29.18, compared to $28.04 in the same quarter last year [6]. - The average weight per shipment is expected to be 1,343.1 pounds, down from 1,358.0 pounds in the previous year [6]. - Net revenue per shipment is estimated at $388.45, compared to $370.98 a year ago [7]. - Pounds per day are projected to be 68.15 million, down from 72.66 million in the same quarter last year [7]. EBITDA Estimates - Adjusted EBITDA for the European Transportation Segment is expected to be $36.99 million, down from $49.00 million in the same quarter last year [8]. - Adjusted EBITDA for the North American Less-Than-Truckload Segment is projected to be $300.53 million, slightly up from $297.00 million a year ago [8]. Stock Performance - XPO shares have increased by 3.9% over the past month, outperforming the Zacks S&P 500 composite's increase of 3.4% [9]. - XPO currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance relative to the overall market in the near term [9].

Core Viewpoint - Wall Street anticipates a year-over-year decline in XPO's earnings and revenues for the quarter ended June 2025, with actual results being crucial for stock price movement [1][3]. Earnings Expectations - XPO is expected to report quarterly earnings of $0.99 per share, reflecting an 11.6% decrease year-over-year, and revenues are projected at $2.04 billion, down 1.8% from the previous year [3]. - The consensus EPS estimate has been revised down by 4.22% over the last 30 days, indicating a bearish sentiment among analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model shows that XPO has a negative Earnings ESP of -0.40%, suggesting analysts have become more pessimistic about the company's earnings prospects [12]. - XPO currently holds a Zacks Rank of 4, which complicates the prediction of an earnings beat [12]. Historical Performance - In the last reported quarter, XPO exceeded earnings expectations by delivering $0.73 per share against an expected $0.65, resulting in a surprise of +12.31% [13]. - Over the past four quarters, XPO has beaten consensus EPS estimates each time [14]. Industry Comparison - Another player in the transportation industry, ArcBest, is expected to report earnings of $1.46 per share for the same quarter, indicating a year-over-year decline of 26.3%, with revenues projected at $1.04 billion, down 3.7% [18]. - ArcBest's consensus EPS estimate has been revised down by 5.7% in the last 30 days, but it has a positive Earnings ESP of +2.23%, suggesting a higher likelihood of beating the consensus EPS estimate [19].

Core Points - XPO announced its team of 38 finalists for the National Truck Driving Championships (NTDC) taking place from August 20-23 in Minneapolis [1][2] - The NTDC is recognized as the industry's premier safety and skills competition, often referred to as the "Super Bowl of Safety," and has been held since 1937 [2] - XPO's finalists represent 25 states and have collectively participated in NTDC over 250 times, qualifying by winning their vehicle class at state championships and maintaining an accident-free record for over a year [2] Company Achievements - Six of XPO's finalists were named Grand Champions of their state competitions, achieving the highest scores across nine equipment categories [3] - XPO secured trophies for the highest overall team scores at state Truck Driving Championships in Wisconsin, Louisiana, Idaho, Delaware, and South Dakota [3] Finalist Details - Notable finalists include Nick Farness from Minnesota, who has driven over one million consecutive accident-free miles, and Joe Hicks from Rhode Island, who won the 4-axle class at the 2024 NTDC [6] - Other experienced drivers include Chris Poynor from Washington, who achieved two million consecutive accident-free miles, and Wilbert Vano from New Jersey, competing in his 14th NTDC [6] Company Overview - XPO, Inc. is a leader in asset-based less-than-truckload (LTL) freight transportation in North America, moving 17 billion pounds of freight annually [8] - The company serves approximately 55,000 customers with 606 locations and employs 38,000 people across North America and Europe [8]

Core Points - XPO will hold its second quarter conference call and webcast on July 31, 2025, at 8:30 a.m. Eastern Time, with results released earlier that morning [1] - The company is a leader in asset-based less-than-truckload (LTL) freight transportation in North America, moving 17 billion pounds of freight annually [3] Company Information - XPO serves approximately 55,000 customers and operates 606 locations with a workforce of 38,000 employees in North America and Europe [3] - The company is headquartered in Greenwich, Connecticut, USA [3] Access Information - The conference call can be accessed toll-free from the US/Canada at 1-877-269-7756, and international callers can reach +1-201-689-7817 [2] - A replay of the conference call will be available until August 30, 2025, using the passcode 13754630 [2]

Core Insights - XPO reported a 5.7% decrease in LTL tonnage per day for May 2025 compared to May 2024, driven by a 5.0% decline in shipments per day and a 0.7% decrease in weight per shipment [1] Company Overview - XPO, Inc. is a leader in asset-based less-than-truckload (LTL) freight transportation in North America, moving 17 billion pounds of freight annually and serving approximately 55,000 customers [2] Operational Metrics - The preliminary LTL segment operating metrics for May 2025 indicate a decrease in both shipments per day and weight per shipment, which contributed to the overall decline in tonnage [1]

Investment Rating - The report does not explicitly state an investment rating for the transportation and logistics industry Core Insights - The report highlights a positive trend in U.S. imports, with a 6.1% week-over-week increase as of May 18, outperforming seasonal expectations by 980 basis points and showing a 2.8% year-over-year increase [2] - Spot rates for truckload transportation have surged, with dry van rates increasing by 6.1% week-over-week, outperforming historical averages [3] - There are concerns regarding potential freight demand impacts due to tariffs, with expectations of a flat outlook for dry van spot rates in 2026 [6] Summary by Sections Import & Congestion Monitor - Container bookings from China to the U.S. are at five-year lows, down 27% compared to 2023, indicating subdued future demand [2] - The report notes a recovery in container imports at the Port of LA/LB, which increased by 24% week-over-week [2] Truckload and Rail Data - Spot rates for dry van, reefers, and flatbed have all increased week-over-week, with dry van rates now 4% higher year-over-year [3] - The dry van load-to-truck ratio increased by 57% week-over-week, indicating a tightening market [6] - Rail management teams express skepticism about the feasibility of transcontinental mergers due to regulatory barriers [7] Airfreight & Surface Transportation - Airfreight rates have been monitored closely due to tariff implications, with significant declines observed in key freight lanes, particularly the China-U.S. lane, which fell by 6% week-over-week [10] - The overall airfreight market is experiencing broad-based weakness, with all major lanes underperforming seasonal expectations year-to-date [10] Rail Performance - The report card for railroads indicates varying performance levels, with some railroads rated as excellent while others are fair or poor [9] - Regulatory challenges are highlighted as a significant barrier to potential mergers in the rail industry, with environmental impact studies being particularly burdensome [7]

Summary of Key Points from the Conference Call Industry Overview - **Healthcare Sector**: Anticipation of an Executive Order on drug pricing expected next week, with a probability of over 70% for the implementation of Most Favored Nation (MFN) pricing to reduce the disparity between US and international drug prices [3][9] - **Transportation and Logistics**: Expected reduction in shipments due to tariffs, but supply chain disruptions may provide some offset. Favorable outlook for specific companies like XPO, NSC, and CP, while UPS and SAIA appear oversold [4] Company-Specific Insights - **Alphabet Inc. (GOOGL)**: Notable shift in search dynamics with the first-ever decline in Safari searches, raising concerns about AI search potentially replacing traditional search methods. However, long-term monetization of AI is expected to ramp up [2][27] - **Microsoft Corporation (MSFT)**: Azure reported a 35% year-over-year revenue growth, with a 34% increase in backlog, outperforming Amazon's AWS and Google's GCP. Combined cloud backlog growth of 33% indicates strong core demand despite AI capacity constraints [5][27] - **Tesla, Inc. (TSLA)**: Focus on Robotaxi and affordable model launches, but concerns over tariffs and execution risks contribute to share price volatility [6][27] - **Walmart Inc. (WMT)**: Anticipated Q1 sales are expected to be in line or slightly better, but caution is advised due to product mix and potential impacts on EBIT growth [5][27] - **Capital One Financial Corporation (COF)**: Continued performance exceeding expectations, with FY27 EPS estimates raised to approximately $25. Merger synergies of $2.7 billion expected to phase in from Q2 [7][27] - **MP Materials**: Potential factory closures in the US due to the absence of rare earth magnet flows from China, impacting industries such as aerospace and electric vehicles [7][27] - **GeneDx**: Management confidence in over 30% volume growth for NICU genetic diagnostics this year, with a compelling valuation at 4x projected 2026 revenues [8][27] Market Dynamics - **Quant Strategy**: Increasing EPS risk indicated by Q1 earnings beats and misses, with the Mag 7 model yielding a cumulative long-short return of 10.5% since its launch [2] - **Russell Rebalance**: Notable buy/sell pressure on specific stocks leading into the June 27 rebalance, with BAM, FLUT, and HWM among the top gainers, while SSB and HQY are under pressure [4] Additional Considerations - **Tariffs and Supply Chain**: The impact of tariffs on shipments and the potential for redirected flows to mitigate some negative effects [4] - **AI and Search Trends**: The evolving landscape of search engines and the implications of AI on traditional search methods [2] This summary encapsulates the critical insights and data points from the conference call, providing a comprehensive overview of the current state of the healthcare and technology sectors, along with specific company performances and market dynamics.

Group 1 - XPO, Inc. is experiencing growth in its bottom line despite a share price recovery from a decline that started in December [1] - The future outlook for XPO appears positive, indicating potential for continued growth [1] Group 2 - Robert F. Abbott, an experienced investor, has been managing investments since 1995 and has incorporated options strategies since 2010 [1]