• Full Year Revenue: $8.1 billion, a 4% increase year-over-year.
• Adjusted EBITDA: $1.3 billion, a 27% increase from the prior year.
• Adjusted Diluted EPS: $3.83, a 31% increase for the year.
• Adjusted Operating Ratio Improvement: 260 basis points.
• Fourth Quarter Revenue: $1.9 billion, 1% lower year-over-year.
• LTL Segment Revenue (Excluding Fuel): Increased by 2% year-over-year.
• Fourth Quarter Adjusted EBITDA: $303 million, a 15% increase year-over-year.
• Fourth Quarter Adjusted EBITDA Margin: 15.8%, a 220 basis points improvement.
• LTL Segment Adjusted EBITDA: $280 million, a 20% increase year-over-year.
• Net Income from Continuing Operations: $76 million, a 31% increase year-over-year.
• Adjusted Diluted EPS for Q4: $0.89, a 16% increase year-over-year.
• Cash Flow from Operating Activities (Q4): $189 million.
• Net Debt Leverage Ratio: 2.5 times trailing 12 months adjusted EBITDA.
• Yield Growth (Excluding Fuel): 7.8% year-over-year.
• Purchase Transportation Cost Reduction: 32% for 2024.
• European Segment Revenue Growth: 3% for the full year.

• Warning! GuruFocus has detected 4 Warning Signs with XPO.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• XPO Inc (NYSE:XPO) reported a strong fourth quarter with year-over-year earnings growth and LTL margin expansion that outperformed the industry.
• The company achieved a 31% increase in adjusted diluted EPS, reaching $3.83 for the year.
• XPO Inc (NYSE:XPO) seamlessly integrated 25 new service centers into its network, enhancing customer service capacity.
• The company improved its damage claims ratio to 0.2%, a significant improvement from 0.3% last year, indicating high service quality.
• XPO Inc (NYSE:XPO) reduced its purchase transportation cost by 32% in 2024, driven by a reduction in linehaul miles outsourced to third parties.

Negative Points

• Total revenue for the fourth quarter was $1.9 billion, which is 1% lower than the prior year on a company-wide basis.
• In the LTL segment, revenue was down 3% year-over-year due to a 23% decline in fuel surcharge revenue tied to the price of diesel.
• The company experienced a 5.7% decline in tonnage per day, with shipments per day down 4.4% year-over-year.
• XPO Inc (NYSE:XPO) faced a 3% increase in total salary and wage benefits in the fourth quarter, primarily due to inflation.
• The European transportation segment reported adjusted EBITDA of $27 million, indicating challenges in the region despite some gains.

Q & A Highlights

Q: Can you discuss the progress and future opportunities in your network 2.0 initiative, particularly regarding cost base improvements and service level enhancements? A: Mario Harik, CEO: The opportunity ahead is largely tied to yield improvements. We started with a 15-point yield differential compared to best-in-class, and now we see a low-teens margin opportunity. This involves service improvements, premium services, and local accounts. We've made significant progress, such as reducing outsourced linehaul miles to 10.7% and expect to reach single digits in 2025, insulating us from rising truckload rates.

Q: Do you expect yield growth to accelerate in the current quarter, and how will this affect your operating ratio (OR)? A: Ali Faghri, Chief Strategy Officer: Yes, we expect yield growth to accelerate in the first quarter beyond the 6.3% achieved in Q4. This is driven by service improvements and a better mix of premium services and local customers. We anticipate outperforming normal seasonality in OR, with sequential improvement from Q4 to Q1, depending on tonnage trends.

Q: Will you see margin improvement in the first quarter year-over-year, and what is your full-year guidance for LTL operating ratio improvement? A: Mario Harik, CEO: We expect to outperform typical Q4 to Q1 deterioration and improve OR sequentially. For the full year, we anticipate a 150 basis point improvement in OR, driven by yield growth, premium services, and cost efficiencies, despite a soft macro environment.

Q: How are you achieving relative pricing outperformance, and what is the sustainability of this trend through 2025? A: Mario Harik, CEO: Our pricing outperformance is not solely from price increases but also from a better mix of local business and premium services. Customers value these services, which come at a higher yield and margin. We aim to price incrementally higher than cost inflation by 100-200 basis points, with upside potential.

Q: What is the competitive dynamic in the local market, and how do you see this evolving with investments in salespeople? A: Mario Harik, CEO: We compete with all carriers by providing excellent service and building strong customer relationships. Our investment in more salespeople and improved service product enables us to grow in the local channel, which is a high-margin, high-yield business.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.