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XPO Logistics: Navigating Economic Headwinds
2 Dec
Summary
- XPO's LTL segment saw tonnage fall 5.4% in November.
- The company is tracking towards its Q4 tonnage outlook.
- Manufacturing PMI indicates ongoing sector contraction.
XPO Logistics delivered a mostly in-line November operational update, indicating its less-than-truckload (LTL) segment experienced a 5.4% year-over-year decline in tonnage. Shipments decreased by 2.2%, and the weight per shipment fell by 3.2%. These figures align with the company's projected mid-single-digit tonnage decline for the fourth quarter, suggesting it is on course to meet its previously stated outlook.
The broader economic landscape presents challenges, with November's Manufacturing Purchasing Managers' Index (PMI) registering 48.2, signifying continued contraction in the sector for 35 of the past 37 months. Despite these macroeconomic headwinds impacting sequential tonnage changes, XPO previously forecasted a fourth-quarter yield increase comparable to the 6% growth seen in the third quarter.
These combined tonnage and yield expectations point towards flat to slightly higher LTL revenue compared to the fourth quarter of the previous year. Furthermore, XPO reaffirmed its commitment to margin improvement, aiming for at least 100 basis points of full-year gain, indicating a target adjusted operating ratio around 84% for the fourth quarter.
