This Mid-Cap Stock Soared Last Year. Can It Do It Again in 2025?

Core Viewpoint - XPO, the third-largest less-than-truckload (LTL) transportation provider in the U.S., continues to show strong performance and potential for growth despite industry challenges, with a focus on improving profitability and customer service [1][4][11] Company Performance - XPO successfully spun off GXO Logistics and RXO, aiming to become a pure-play North American LTL company while maintaining strong performance in its European segment [2] - In 2022, XPO's stock increased by 50%, and it has gained 12% year-to-date in 2025, indicating strong market performance [3][9] - For the fourth quarter, XPO's revenue was $1.92 billion, down 1% year-over-year, but the company achieved an adjusted earnings per share of $0.89, surpassing estimates [4][8] Operational Efficiency - Despite a decline in tonnage per day by 5.7% and shipments per day by 4.4%, XPO improved its yield by 6.3%, reflecting effective pricing strategies and enhanced customer service [4][5] - The company's operating ratio improved, falling 30 basis points to 86.2% in Q4 and 260 basis points to 84.8% for the year, indicating better cost management [7][8] Market Outlook - XPO is well-positioned for future growth, with expectations of a recovery in demand supported by improvements in the ISM manufacturing index [7][9] - The company benefits from operating in a leveraged industry, where capacity utilization improvements can significantly impact profitability [10] - If the industrial economy rebounds, XPO's stock is expected to surge further, driven by rising pricing, customer satisfaction, and operational efficiencies [11]