Al Root

XPO scored an earnings beat on Thursday, evidence that the truck logistics provider is doing well in a challenging environment -- one that just might be turning around. The stock soared.

In midday trading, shares were up 7.6% at $146.73; the S&P 500 was up about 0.2% and the Dow Jones Industrial Average was down about 0.2%.

In the morning, XPO reported fourth-quarter earnings per share of 89 cents from sales of $1.9 billion. Wall Street was looking for 62 cents and $1.9 billion, respectively.

The earnings beat came despite weakness in the company's core less-than-truckload, or LTL, business. Shipments per day fell 4.4% year over year. It was the second consecutive quarter of per-day declines.

Insourcing some of its hauling needs and improving service helped XPO produce the beat.

Less than truckload what it sounds like: a truck that isn't full or is being filled by a customer that can't fill the truck with its loads. LTL providers typically have shorter hauls and serve industrial customers.

The U.S. industrial economy has been weighed down the past two years by higher interest rates and the post-Covid recovery.

The sector, however, started expanding in January, however. Monthly manufacturing activity, as measured monthly by the Institute for Supply Management Manufacturing Purchasing Managers' Index, went above 50. Above 50 indicates growth.

"There's a lot of optimism from customers," said XPO CEO Mario Harik, who pointed out that the new orders index has been above 50 for a few months. More activity turns into business for XPO in a few months, he added.

XPO surveys its customers about demand expectations. About 50% expect demand to accelerate in the first half of the year, and about 15% expect additional deceleration.

On the other hand, XPO's European business is still slow. Europe's economy is being held back by higher interest rates and high energy costs.

For XPO, Europe is relatively small. Investors are now focused on the potential improvement of the more critical U.S. market.

Write to Al Root at allen.root@dowjones.com

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February 06, 2025 12:45 ET (17:45 GMT)

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