Less-than-truckload carrier XPO reported shipments were up again in November but that lower shipment weights dragged down tonnage.
The Tuesday report showed the year-over-year (y/y) progression in metrics was more muted during November than what was previously reported for October. October shipments were up 6% y/y while November shipments increased 3.8%. A roughly 4% decline in weight per shipment in each month resulted in tons per day in the network up 2.5% in October but down slightly in November.
XPO (NYSE: XPO) does have a tougher comparison to the 2022 fourth quarter than most of its other publicly traded peers. Its shipments and tonnage were slightly positive in the year-ago quarter, when the rest of the industry was recording high-single-digit declines.
“We’re continuing to make good progress on a number of fronts in the fourth quarter despite the soft freight market,” CEO Mario Harik said.
Excluding the exit of Yellow, which resulted in a realignment of LTL market share, demand remains fairly weak.
A proxy for LTL freight demand, the Manufacturing Purchasing Managers’ Index, remained in contraction territory during November. The index was unchanged at 46.7 and below the neutral threshold of 50 for the 13th consecutive month. Softness throughout the industrial sector has resulted in lighter shipment weights across the industry.
XPO doesn’t provide any revenue-based metrics in its intraquarter updates but Harik said “yield ex-fuel growth is tracking ahead of expectations for the quarter, with continued strength heading into 2024.”
XPO previously guided to a high-single-digit y/y increase in yield during the fourth quarter, with tonnage up by a low-single-digit percentage.
“There’s a strong correlation between these operating gains and our strategy to become the industry’s best service provider,” Harik said. “By enhancing our service quality, we’re increasing our yield and can capture more profitable share when industry tonnage rebounds.”
He said the company’s damage frequency improved again to a “new company record” in the first two months of the fourth quarter.
The report came hours after XPO was announced to have a winning bid for 28 of Yellow’s terminals at a purchase price of $870 million. A Delaware bankruptcy court filing released late Monday showed the company won the largest allocation of commitments from an auction that secured new owners for 130 service centers valued at almost $1.9 billion.
The first wave of Yellow’s asset sales is expected to be finalized at a Dec. 12 hearing. The filing said Yellow’s 46 remaining owned terminals as well as some leased properties will be sold in the future.
XPO also announced Tuesday it entered into a bridge term loan financing package equal to the amount of its bid. The company plans a $585 million private offering of senior unsecured notes and is pursuing commitments for $400 million in senior secured debt. The proceeds will be used to repay the bridge loan as well as refinance other outstanding debt.
The company expects the asset acquisition to be accretive to adjusted earnings before interest, taxes, depreciation and amortization but dilutive to adjusted earnings per share next year. The deal is expected to be accretive to adjusted EPS in 2025.
More FreightWaves articles by Todd Maiden
- First wave of Yellow terminals will go for $1.9B; sale process ongoing
- Landstar CEO Jim Gattoni to retire
- Saia holds on to Yellow’s freight
