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Bear of the Day: XPO Logistics (XPO)

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Based in Greenwich, CT, XPO Logistics Inc. XPO is athird-party logistics provider offering fast, single-source solutions for time-critical and service-sensitive shipments through its non-asset-based transportation network. XPO serves customers in the U.S., Canada, and Mexico with domestic and international freight destinations.

A Big Corporate Shake-Up

Earlier this summer, XPO’s board announced that it approved a decision to spin off its logistics division into a new company, GXO Logistics GXO.

GXO’s business will focus on supply chains, with a lot of exposure to fast growing sectors like e-commerce, while XPO, which is now one of the top less-than-truckload trucking operators, will focus mainly on large freight brokerage operations.

Management’s hope is that this move will allow both companies to be more successful on their own, allowing investors to more accurately value each business individually.

The split became official last month, giving XPO investors one share of GXO for every share of XPO they owned.

Bottom Line

XPO is now a Zacks Rank #5 (Strong Sell).

Five analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen over two dollars to $4.30 per share. Wall Street has lowered its earnings picture for 2022 as well, but the bottom line is still expected to post year-over-year growth.

Shares of XPO tanked 37% last month, but this big drop is just a reflection of the spinoff. Because shareholders received that new GXO share, investors didn’t lose any value overall and the stock’s big drop isn’t as bad as it seems.

XPO was a big pandemic winner, and because of the split, it now boasts a lean balance sheet and a profitable business. But looking ahead, it may be volatile for XPO in the short-term as analysts adjust their outlook and investors determine if they want to own a company that is focused solely on the trucking industry.

Those who are interested in adding a more stable transportation stock to their portfolio could consider ocean logistics and shipping services company Matson MATX. MATX is a #1 (Strong Buy) on the Zacks Rank, and the Zacks Consensus Estimate has jumped to $13.43 a share for fiscal 2021, representing 202.5% growth.

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Matson, Inc. (MATX) : Free Stock Analysis Report
XPO Logistics, Inc. (XPO) : Free Stock Analysis Report
GXO Logistics, Inc. (GXO) : Free Stock Analysis Report
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