XPO shares plunge after earnings miss

FedEx shares also tumble over speculation that Amazon may handle more logistics work in house.    The stock market reacted negatively after XPO Logistics reported Thursday that it had net income of $91 million in the fourth quarter of 2018, compared with $207 million in the same 2017 period. The decrease came as the company reported revenue in the fourth quarter of 2018 was $4.39 billion, compared with $4.19 billion in the fourth quarter of 2017.
   For the full year, XPO had a profit of $444 million in 2018, compared with $360 million in 2017. Revenue grew to $17.28 billion in 2018, compared to $15.38 billion in 2017.
   “There is no other way to say it, we missed the quarter,” said Bradley Jacobs, chairman and chief executive officer of XPO Logistics in a call with securities analysts. “For the full year, we delivered 12.3 percent revenue growth, 9.3 percent organic growth and $1.56 billion of adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) — up 14.3 percent over 2017. However, we missed our fourth-quarter forecast for adjusted EBITDA, primarily due to headwinds in France and the U.K. and a loss of profit in the postal injection business with our largest customer.”
   Jacobs said the company’s largest customer pulled back two-thirds or $600 million of business. Reuters said that customer may be Amazon, and Barron’s magazine speculated the drop in both XPO and FedEx stock on Friday may be because of concerns Amazon “could be handling more of its delivery work in house.”
   “I’m optimistic that we will get that business back from other customers,” he said.
   XPO does not comment on specific customers, but Jacobs told analysts that in 2018 XPO’s top five customers represented about 11 percent of the company’s revenue. Going forward, with the loss of its largest customer, it looked as if the top five customers in 2019 will represent less than 8 percent of revenue. All told, XPO has about 50,000 customers.
   The stock market reaction was swift. The company’s shares plunged from $59.54 at the close of trading Thursday to open at $49.86 on Friday. The company’s stock has traded as high as $116.27 in the past year. FedEx stock, which closed at $185.89 on Thursday, opened at $179 per share.
   The company, which said it had purchased 18 million shares of its own stock for about $1 billion since announcing those plans in December, said its board had authorized the purchase of another $1.5 billion of XPO shares. Of course the drop in stock price means XPO may be able to buy more shares with the same amount of money.
   XPO’s transportation segment generated revenue of $2.83 billion for the quarter, compared with $2.78 billion for the same period in 2017. Segment revenue growth was led by less-than-truckload (LTL) in North America and Europe and by European truckload and freight brokerage.
   Evan Armstrong, president of the 3PL consulting firm of Armstrong & Associates, said the bankruptcy of the LTL carrier New England Motor Freight this week could present some opportunities for XPO freight.
   “Even though New England Motor Freight was only a $400 million LTL carrier, there’s going to be some additional shipments that need to be covered. It’s a fairly tight capacity market, although LTL tends to handle that much better than truckload,” he said.
   Jacobs said XPO has had an uptick in inquiries from New England Motor Freight customers. An XPO spokesman said that is “pretty common in situations like that. Some of the freight matches our network and some doesn’t.”
   XPO said its logistics segment “generated revenue of $1.59 billion for the quarter, a 10.0 percent increase from the same period in 2017. Organic revenue growth, which excludes the impacts of fuel and foreign exchange, was 12.4 percent year-over-year. Segment revenue growth was led by rising demand for e-commerce logistics globally and by the consumer packaged goods and food and beverage sectors in North America and the fashion sector in Europe.”