The roll-up freight brokerage and logistics provider had EBITDA of $166 million in the quarter as it digests recent deals for Norbert Dentressangle and LTL carrier Con-way.
The fast-growing diversified third-party logistics provider XPO Logistics on Wednesday said it exceeded its expectations for revenues and earnings before interest, tax, depreciation, and amortization in the third quarter of 2015.
The company, which has closed a number of major acquisitions this year across the contract logistics, less-than-truckload, and drayage industries, generated EBITDA of $166 million on revenues of $2.4 billion for the quarter.
Year-over-year comparisons for the company are of dubious value due to the volume of acquisitions XPO has undertaken, including a $3.5 billion deal for French truckload and contract logistics company Norbert Dentressangle and its recent $3 billion deal for less-than-truckload carrier Con-way Inc. Adjusted EBITDA in the third quarter of 2014, for example, stood at just $24.2 million.
“In our transportation segment, we improved margins year-over-year by optimizing our pricing and lowering our cost of purchased transportation in truck brokerage and intermodal, last mile, expedite and global forwarding,” XPO Chief Executive Officer Brad Jacobs said of the results.
“We’re operating our logistics segment more profitably worldwide, and we’re executing on an exciting pipeline of cross-selling opportunities. Our European operations overall are performing well ahead of expectations – adjusted EBITDA in Europe was up over 26 percent year-over-year for transport and 17 percent for logistics.”
The transportation and logistics group of the investment bank Stifel said Thursday that the company’s performance surpassed its own expectations as well.
“Investors have been skeptical over the past few months due to the company’s large ticket acquisition run, which subsequently drove 247 million shares to have exchanged hands with only about 95 million shares in the float, basically indicating a full investor base turn over,” Stifel said in a client advisory note.
“Despite having approximately $530 million in cash, an undrawn asset-backed revolver, and a highly integrated global platform, we would be surprised if there were any other transformational acquisitions announced within the next six months, and perhaps a year. Of course, a few tuck in deals are still in the realm of possibility and will be sourced opportunistically,” the firm added.
Stifel noted that XPO’s quarterly earnings per share results have been difficult to estimate “as assumptions surrounding revenue growth, potential acquisitions, margin expansion, diluted share count, debt balances, and associated interest expense amortization of intangible assets, etc. have evolved just as rapidly as the company’s fast-paced roll-up strategy. We are likely still a year or two away from the company settling into a more mature and developed state —where quarterly EPS estimates will be more reflective of actual operating performance and less reflective of the outsized impact of the acquisition-related costs in the particular quarter.”
So many major acquisitions in such a short time also makes it difficult to estimate the value of XPO’s stock, according to Nate Brochmann, a financial analyst with William Blair & Company Equity Research.
“At $28, [XPO’s] stock is trading at 6 times and 4 times consensus 2016 and 2017 EBITDA estimates, respectively,” Brochmann wrote in a recent investor update. “Assuming the U.S. macroeconomic environment holds up, which we believe it will due to favorable consumer trends, the stock seems attractive to us at current levels for longer-term investors with a greater risk tolerance.”
XPO Logistics exceeds Q3 market expectations
