XPO's LTL Ratio Hits Record as Profit Growth Accelerates
XPO posted a record 79.9% operating ratio in North American LTL as adjusted earnings per share jumped 61.9% to $1.70.
XPO (XPO) reported accelerating profit growth in the second quarter, with revenue rising 13.2% year over year to $2.36 billion, up from 7.3% growth in the first quarter. Adjusted diluted earnings per share climbed 61.9% to $1.70 from $1.05 a year earlier, building on 38.4% growth in the prior quarter. Net income rose 52.8% to $162 million, also an acceleration from 46.4% growth in the first quarter.
The gains centered on North American LTL, where the adjusted operating ratio improved to 79.9%, a record for the segment and a 300 basis point improvement from a year earlier, following an 83.9% ratio in the first quarter. The sequential improvement of roughly 400 basis points came alongside steady pricing, with yield excluding fuel up 4.4% year over year, though shipments per day growth slowed to 2.8% from 3.0% in the prior quarter. Average weight per shipment fell 1.8%, pointing to a shift toward smaller, more frequent shipments even as volume growth cooled.
Fuel surcharge revenue in the LTL segment surged 71.6% to $314 million, far outpacing the 5.4% growth in revenue excluding fuel surcharge, which reached $1.11 billion. That gap widened the distance between reported top-line growth and the underlying pricing and volume trends driving the operating ratio improvement.
Consolidated adjusted EBITDA rose 27.6% to $434 million, up from 14.7% growth in the first quarter, pushing the adjusted EBITDA margin to 18.4% from 16.3% a year earlier, a 210 basis point expansion. Diluted EPS on a GAAP basis rose 52.8% to $1.36, compared with 46.6% growth in the prior quarter. The quarter's results also included a new disclosure of $7 million in after-tax gains, or $0.06 a share, from real estate sales, an item not broken out in the year-earlier quarter or in the first-quarter release.
Europe told a different story. The European Transportation segment swung to a $6 million operating loss in the quarter, compared with $11 million of operating income a year earlier, marking the second consecutive quarter of year-over-year deterioration after a $6 million loss in the first quarter. Restructuring costs in the segment jumped to $21 million from $1 million a year ago, bringing the six-month total to $27 million versus $12 million in the prior-year period.
XPO drew down cash during the quarter, with cash and equivalents falling to $298 million from $310 million at year-end 2023, even after generating $308 million in operating cash flow. The company used $70 million for stock repurchases and another $70 million to repay term loans in the period.
The divergence between North America and Europe now stands out as the company's clearest fault line: a record-low operating ratio and accelerating earnings growth domestically, set against rising restructuring costs and a second straight quarterly operating loss abroad.