XPO Logistics Gets The Market Back In Gear Shares of XPO Logistics (NYSE: XPO) have been in a correction the last few months because of the headwinds facing the industry. While demand is very high for trucking, shortages...

XPO Logistics Growth Strategy Pays Off

Shares of XPO Logistics (NYSE: XPO) have been in a correction the last few months because of the headwinds facing the industry. While demand is very high for trucking, shortages of drivers and the cost of retaining the drivers there are, along with other input costs, were cutting into the bottom line. If there is anything that will drive a stock's price lower it is an impairment to the bottom line but that story is played. The company began working on a multi-pronged strategy during the 2nd half of 2021 that is now paying off. That strategy includes raising rates, increasing the output from its truck driving school, building more trailers, and increasing the footprint, all of which contributed to record-setting results in fiscal Q4 and margin improvement.

XPO Logistics Beats And Raises Guidance

XPO Logistics management has proven to be very nimble over the past quarter not only shepherding the company to record-setting revenue but improving the margin as well. The company reported $3.36 billion in net revenue for a gain of 14.3% over last year and also beat the consensus estimate by 340 basis points. The revenue was driven by a 9.6% increase in LTL shipping and 17% increase in brokerage services that we see underpinning results for the foreseeable future. LTL revenue gains were driven entirely by pricing increases, however, and were offset by a slight decline in weight per load.

Moving down, the company saw margin improvement at all levels and is forecasting a return to YOY improvement by the middle of this fiscal year. As for earnings, the GAAP earnings of $1.08 improved from last year's $0.33 while the $1.34 in adjusted earnings is up $0.15 from last year and beat the Marketbeat.com consensus by $0.36.

The company did not give guidance for revenue but is forecasting earnings and margins above expectations. The adjusted earnings of $5.00 to $5.45 are up 22% at the midpoint of the range and compare well to the $4.74 consensus. In our view, with systemic demand for shipping still strong and the company increasing its driver, trailer, and loading bay count there is an upside risk in the outlook. There is also little worry in regards to the balance sheet because the company is well-capitalized, has very little debt, and is on track to reduce its debt leverage ratio to below 2X FCF within the next two years.

The Analysts Like XPO Logistics

The analysts have yet to speak out about XPO Logistic's results or outlook but we think a wave of positive commentary is on the way. The most recent activity is bullish, however, with a notable downtick in the Marketbeat.com consensus price target. The consensus price target is down over the last 30 and 90-day period despite the firm Buy rating. The silver lining is that the consensus is projecting about 62% of upside for the stock and puts the market well into new all-time high territory.

The Technical Outlook: XPO Logistics Is Pulling Out Of The Terminal

Shares of XPO Logistics are up more than 8% in the wake of the earnings report and look ready to head higher. The market is back above the short-term moving average with both MACD and stochastic confirming the buy with strong signals of their own. This setup should lead to a move above $72 at least, and for upward bias to trading action over the next quarter. Assuming the company comes out with more good news with the next report, we see it moving up to a new all-time high as well.