XPO will be a 'pure-play North American' company: CEO
XPO (XPO) stock has soared over 120% year-to-date. The freight transportation firm saw a 5% jump in daily shipments last quarter, aided by rival Yellow's bankruptcy in August. However, XPO CEO Mario Harik emphasized the company had already been "gaining profitable market share."
Harik said XPO had "great performance and pricing in the third quarter," expecting it to continue into Q4. While positioning XPO as a "pure-play North American LTL company," its European business is performing well currently too. But long-term, their priority is ensuring the North America segment thrives.
Though serving large accounts like Ulta, John Deere, and Ford, Harik stressed much success stems from "mom and pop companies" and smaller accounts. With over 3,000 new local customers, XPO has steadily continued to gain share, Harik says.
"In our industry, when you provide great service for your customers, that over time leads to pricing increases and pricing gains as well," Harik tells Yahoo Finance.
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Video Transcript
BRAD SMITH: Welcome back to Yahoo Finance. XPO has seen a blockbuster year so far in 2023. The stock pushing higher by over 120% year-to-date. The freight transportation company got a big boost in the third quarter with its shipments per day jumping 5% from the second quarter, due in part to Yellow's bankruptcy and that filing that came back in August. For more on the state of the shipping industry, we're joined by XPO CEO Mario Harik.
Mario, great to have you here with us, as always. First and foremost, you talked in this most recent quarter in the release about some of the pricing initiatives that you're set to roll out. Where can investors expect that to show up in some of the financial performance for the company?
MARIO HARIK: Firstly, thanks so much for having me. Well, you look at the improvements we have done on our service product. They've been tremendous. And in our industry, when you provide great service for your customers, that over time leads to pricing increases and pricing gains as well.
So we had great performance and pricing in the third quarter, where it was up 6.4% on a year-on-year basis. And we do expect that to accelerate in the fourth quarter, to be up high single digit. But this is ex fuel. So this is just the base underlying pricing in our industry.
DIANE KING HALL: And Mario, let's broaden this out internationally. Where are you all with divesting your European business?
MARIO HARIK: Well, long term Diane, our goal is to be a pure-play North American LTL company. But meanwhile, our European business is performing really well. You look-- despite a very soft European economy, we are improving our profits in our European business.
We're providing great service for customers. We're managing costs very effectively. So the business firing on all cylinders. But we-- long term, we continue to want to be a pure-play North American LTL company.
BRAD SMITH: And in that North American, less than truckload business. On a year-over-year basis, shipments per day increasing by about 7.8%. Tonnage per day, also up by about 3.1%. Where are you seeing a lot of that demand flow in from?
MARIO HARIK: So, it's been a combination. So today, 2/3 of our customers are industrial companies, and one third are retail companies. And when we look at the increase on a quarter-over-quarter basis-- and we were up 8% in shipment count on a year-on-year basis. We've seen it increase in each one of our channels.
But there's a specific segment that is higher on increases than others. And these are local accounts. These are small mom-and-pop companies where so far this year, we've added more than 3,000 new customers. And we've seen a double-digit increase, 13% increase in shipment count from those smaller accounts based on us gaining market share with the service improvements we're making.
DIANE KING HALL: And Mario, we know that you all were a beneficiary of what occurred, with regard to the bankruptcy for Yellow. How do you continue to scale beyond the benefit that that gave you all as a company?
MARIO HARIK: Yeah. So there, if you go back to the first half of the year, we had already been gaining market share. So the state of freight-- the freight markets have been soft so far this year.
But in our industry, if you look at the first half, shipments across the industry were down 10%. But even before the Yellow bankruptcy, our shipment count was up 2% on a year-on-year basis in the second quarter. And that was driven by the improvements in service that we're doing to our customers. And they were giving us a bigger market share. And we were gaining profitable market share based on these improvements for our customers.
