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Home » XPO notches strong fourth quarter as shippers pay for service in chaotic market

XPO notches strong fourth quarter as shippers pay for service in chaotic market

After spinning off contract logistics unit in 2021, transportation division generates profit from LTL and brokerage arms.

xpo Screen Shot 2022-02-08 at 6.05.26 PM.png
February 8, 2022
Ben Ames
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Transportation and logistics provider XPO Logistics Inc. today said it has climbed to a healthy annual profit by providing reliable freight service in a tightly congested market, as a shortage of trucks and drivers pushes shippers to expand their transportation spending budgets with no end in sight.

For its 2021 fiscal year, Greenwich, Connecticut-based XPO reported total revenue of $12.8 billion, compared with $10.2 billion for 2020. And that increased revenue led to profits, with net income from continuing operations attributable to common shareholders of $323 million for 2021, compared to a loss of $41 million for 2020. By another accounting, XPO said its earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2021 was $1.24 billion, compared with $847 million for 2020.

The results mark a busy year for XPO, which earlier in 2021 spun off its contract logistics arm as an independent company called GXO Logistics Inc. The financial results announced today factor in that spin-off, the company said.

XPO’s strong annual result was helped across the finish line by a fourth quarter surge that produced its highest revenue for any quarter in the company’s 10-year history. For the fourth quarter, XPO collected $3.4 billion in revenue, an increase of 14% over that quarter last year.

According to XPO, the numbers were supported by the performance of the company’s North American less than truckload (LTL) segment, which generated revenue of $1.0 billion for the fourth quarter 2021, compared with $916 million for the same period in 2020. That led to adjusted EBITDA of $210 million, compared with $202 million for the same period in 2020.

XPO also pointed to its brokerage arm, which drew in revenue of $2.41 billion for the fourth quarter 2021, compared with $2.06 billion for the same period in 2020. That led to adjusted EBITDA of $161 million for the fourth quarter, compared with $125 million for the same period in 2020.

Those profits came in a market that was rocked in 2021 by waves of pandemic infections and restrictions, as well as market conditions like rising fuel and labor costs and an acute shortage of truck drivers and new trucks.

The company was able to succeed against that backdrop by ensuring that it secured “ample pricing” for its services by charging shippers more to move their freight in a challenging environment, XPO Senior Market Strategist Kevin Sterling said. “At the end of the day, when congestion and chaos are driving market conditions, that’s when our offering really shines,” Sterling said. “Our customers turn to us for solutions because we can solve complex problems for shippers.”

For decades, trucking fleets have competed for shippers’ business based purely on price, he said. But in the stormy business weather of 2021, fleets now bid for loads by offering better services, such as on-time delivery and freight that is handled damage-free, Sterling said. And with forecasts saying that freight conditions are not set to loosen in 2022, XPO is forging ahead with the same strategy.

The company even has its own approach to address the chronic driver shortage that fleet owners have complained about for years. Watching many commercial driving schools shutter their doors during pandemic conditions in 2020, XPO launched its own chain of driving schools. The company now operates 130 truck driver schools across the U.S. that graduated 900 students in 2021 and are on track to graduate 1,800 in 2022. With a total driver pool of some 12,000 employees today, that pipeline represents 15% of the company’s workforce at a time when increasing numbers of older drivers are opting to retire.

“We think the freight environment will remain quite robust and that will continue into 2022,” Sterling said. “We’re hoping to capitalize on that.”

XPO Logistics announces fourth quarter results for 2021. https://t.co/VkwFCQTyab #Q42021 #Q4 #earnings #results

— XPO Logistics, Inc. (@XPOLogistics) February 8, 2022
Trucking
KEYWORDS XPO Logistics
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    Ben Ames is Editor at Large and a Senior Editor at Supply Chain Quarterly?s sister publication, DC Velocity.

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