Company Overview & Business Model

The “New” XPO: A Transformed LTL Powerhouse

Following a period of significant corporate restructuring, XPO, Inc. (XPO) has emerged as a fundamentally different entity from its previous incarnation as a diversified logistics conglomerate. The strategic spin-offs of its contract logistics business into GXO Logistics, Inc. (GXO) in August 2021 ¹ and its tech-enabled brokered transportation platform into RXO, Inc. (RXO) in November 2022 ³ marked a deliberate pivot toward simplification and focus. The company officially changed its name from XPO Logistics, Inc. to XPO, Inc. in December 2022 to reflect this new identity.⁵ Today, XPO’s business is primarily concentrated on asset-based Less-Than-Truckload (LTL) freight transportation in North America, complemented by a substantial European transportation business.⁶

This transformation has profound implications for investment analysis. The previous “sum-of-the-parts” valuation narrative, which required assessing disparate business models in contract logistics, brokerage, and LTL, has been replaced. The investment thesis for the “new” XPO is now overwhelmingly tied to the operational performance, strategic execution, and cyclical dynamics of the North American LTL industry. This structural simplification provides greater clarity for investors but also concentrates the company’s exposure, making it more sensitive to the specific risks and opportunities within the LTL sector. The rationale behind the spin-offs was to create “high-performing, pure-play companies,” each with greater flexibility to tailor strategic decision-making and capital allocation to its specific end-markets.⁸

Segment Breakdown

XPO’s operations are organized into two reportable segments:

North American Less-Than-Truckload (LTL)

This segment represents the core of the modern XPO and is its largest and most profitable business. It provides shippers with extensive geographic density and day-definite domestic and cross-border LTL services, covering approximately 99% of U.S. zip codes, along with key trade lanes into Mexico, Canada, and the Caribbean.¹⁰ In fiscal year 2024, the LTL segment was responsible for moving approximately 18 billion pounds of freight for around 36,000 shippers.¹¹

As of its 2024 10-K filing, XPO commanded an estimated 9% share of the U.S. LTL market, solidifying its position as one of the top carriers in a highly consolidated industry.¹² A unique and strategic component of this segment is XPO’s vertically integrated, in-house trailer manufacturing operation, which provides a significant competitive advantage in sourcing equipment.¹⁰ For the full year 2024, this segment generated $4.9 billion in revenue and $1.12 billion in adjusted EBITDA.¹⁴

European Transportation

XPO maintains a significant and diversified transportation business in Europe, offering a wide array of services that include dedicated truckload, LTL (often structured as pallet networks), full truckload brokerage, managed transportation, last mile delivery, and multimodal solutions.⁵ The company holds leading market positions in key European geographies. It is the number one full truckload broker and LTL/pallet network provider in both France and the Iberian Peninsula (Spain and Portugal) and is a top-tier dedicated truckload provider in the United Kingdom.¹¹ For the full year 2024, the European Transportation segment generated $3.17 billion in revenue and an adjusted EBITDA of $158 million.¹⁴

Operating Model and Value Proposition

XPO operates an integrated network of physical assets, proprietary technology, and personnel, encompassing 608 locations and approximately 38,000 employees as of mid-2025.⁶ The North American LTL business is built on a classic hub-and-spoke model. This model is capital-intensive, requiring significant investment in a network of terminals, tractors, and trailers, which in turn creates high barriers to entry for new competitors and allows established players to achieve significant network efficiencies and operating leverage.

The company’s stated value proposition is centered on delivering superior, reliable service to its customers. Management consistently emphasizes improvements in key service metrics as a core differentiator. As of the second quarter of 2025, XPO had achieved its 13th consecutive quarter of year-over-year improvement in on-time performance and had driven its damage claims ratio down to an impressively low 0.3%.¹⁵ This relentless focus on service quality is not merely an operational objective but a cornerstone of the company’s commercial strategy. In the often-commoditized LTL industry, where price is a primary consideration, establishing a reputation for superior and consistent service allows a carrier to shift the conversation with customers from pure price competition to a more durable, value-based relationship. By minimizing the risk of late or damaged shipments—which can cause costly disruptions for customers, such as manufacturing line shutdowns or retail stock-outs—XPO can command stronger pricing (yield). This ability to leverage service quality into pricing power is a critical element of the company’s strategy for long-term margin expansion.¹⁷

Industry Dynamics & Market Environment

North American LTL Market

The North American LTL market is a foundational component of the U.S. economy, characterized by its large scale, steady growth, and rational competitive structure. Market size estimates vary, but research indicates a substantial and growing market. One report estimated the North American LTL market at $84.6 billion in 2024, with a projection to reach $120.6 billion by 2030, reflecting a compound annual growth rate (CAGR) of 6.1% from 2025 to 2030.¹⁰ Another study focused on the U.S. market estimated its size at $114 billion in 2025, with a projected 4.13% CAGR to reach $139.6 billion by 2030.²⁰ While specific forecasts differ, the consensus points toward consistent, mid-single-digit secular growth.

This growth is propelled by several key drivers. The continued expansion of e-commerce is a primary tailwind, as it necessitates more frequent, smaller shipments to replenish inventory at fulfillment centers, distribution hubs, and retail stores.²¹ The industrial economy, which has historically accounted for approximately two-thirds of LTL shipment volume, remains a critical demand driver, with its health directly influencing freight volumes.²³ Emerging trends such as nearshoring of manufacturing and government-led infrastructure investments are also viewed as positive long-term catalysts for freight demand.²⁰

The LTL industry is highly concentrated, with the top 10 carriers controlling over 75% of the market.¹⁸ This structure, combined with the high capital costs required to build and maintain a national terminal network, creates significant barriers to entry and fosters a rational pricing environment.²⁴ Historically, the industry has demonstrated strong pricing discipline, with carriers implementing annual General Rate Increases (GRIs) in the 3% to 8% range.²³ The environment in 2025 is seen as more complex, with some analysts forecasting more modest rate increases of 1-3% due to the reintroduction of capacity following the 2023 bankruptcy of Yellow Corporation and a softer macroeconomic backdrop.²³

European Transportation Market

The European logistics market is vast, estimated at $782.8 billion in 2024 with a projected CAGR of 7.3% through 2030.²⁵ However, the near-term outlook is more subdued, with forecasts for conservative growth of around 2% in 2025, constrained by economic headwinds and a sluggish industrial sector, particularly in Germany’s contracting economy.²⁶

Key trends shaping the European market include the rapid adoption of digitalization and AI to enhance efficiency, the continued rise of e-commerce demanding faster and more flexible delivery solutions, and a strong regulatory and customer-driven push toward sustainability and “green logistics”.²⁷ The market also faces significant labor challenges, including persistent skill shortages, cross-border workforce demands, and wage inflation.²⁶

The growth of e-commerce presents both a significant opportunity and a complex challenge for LTL carriers. While it provides a powerful long-term tailwind for freight volume, it also introduces operational complexities that must be managed effectively. The nature of e-commerce, with its smaller, more frequent shipments, is a natural fit for the LTL model.²² However, it also brings challenges such as high rates of product returns that require efficient reverse logistics capabilities, severe capacity constraints during peak shopping seasons, and heightened customer expectations for rapid, last-mile delivery, which is historically the most complex and costly part of the supply chain.²² Success in this environment requires substantial investment in technology—including advanced Transportation Management Systems (TMS), real-time shipment tracking, and sophisticated route optimization—to manage this complexity profitably.²² This technological imperative creates a competitive divide, favoring large, well-capitalized carriers like XPO that can make these investments over smaller, less-sophisticated rivals.

Competitive Landscape & Market Position

Key Competitors

XPO operates in a competitive but rational landscape, particularly in its core North American LTL segment. Its primary competitors are well-established national and multi-regional carriers, each with significant scale and network density. This peer group includes Old Dominion Freight Line (ODFL), Saia (SAIA), ArcBest (ARCB), TFI International (TFII), and the LTL division of FedEx (FedEx Freight).¹⁰ These companies represent the upper echelon of the industry and are the most relevant benchmarks for XPO’s performance. For example, ODFL operates a network of 261 service centers, Saia has over 200 terminals, and ArcBest maintains 250 campuses and service centers.³⁴ In the more fragmented European market, XPO competes with global logistics giants such as DHL, DB Schenker, and Kuehne + Nagel, as well as numerous regional and local players.³⁷

Market Position and Competitive Advantages

With an approximate 9% share of the U.S. LTL market, XPO is firmly positioned as a top-tier national carrier.¹² The company has cultivated several key competitive advantages that form a protective moat around its business:

• Network Scale and Density: XPO’s extensive network of 608 locations provides comprehensive coverage and creates significant barriers to entry.⁶ This scale allows for operational efficiencies in freight consolidation, linehaul movements, and final-mile delivery, which are difficult for smaller competitors to replicate.
• Proprietary Technology: XPO has invested heavily in developing its own technology platforms for pricing, network optimization, and customer service. This technology is a key enabler of its yield management strategy and its push to drive operational efficiencies through data analytics and, increasingly, artificial intelligence.¹³
• Vertical Integration and Self-Reliance: XPO possesses unique in-house capabilities that differentiate it from peers and provide a strategic buffer against common industry bottlenecks. The company operates its own trailer manufacturing facility, which produced over 6,400 trailers in 2023, and runs a network of 130 commercial driver schools, which trained over 1,700 new drivers in 2022.¹⁰

These investments in self-reliance are more than just cost-saving measures; they represent a sophisticated strategy to de-risk the business from two of the trucking industry’s most persistent and significant operational challenges: equipment shortages and driver availability. The industry is characterized by chronic driver shortages, an aging workforce, and intense competition for qualified labor, which puts continuous upward pressure on wages.⁴¹ Similarly, the supply of new tractors and trailers can be subject to manufacturing backlogs and price volatility. XPO’s 2023 10-K explicitly identifies these capabilities as “competitively advantageous… when industry conditions make it difficult to source equipment or drivers”.¹⁰ By controlling a portion of its own supply of these critical inputs, XPO gains greater command over its growth trajectory, cost structure, and service quality. This allows the company to expand its fleet and driver pool more predictably and potentially more economically than competitors that are entirely dependent on third-party manufacturers and the fiercely competitive open market for drivers. This self-sufficiency provides a tangible, long-term competitive advantage and a degree of insulation from market volatility.

Historical Performance & Growth Analysis

An analysis of XPO’s financial performance in the period following its major spin-offs reveals a company successfully navigating a challenging freight environment while executing a strategy focused on profitability and operational improvement.

Consolidated Financial Performance (Post-Spin Era)

The financial results for the years 2022 through 2024 reflect the performance of the “new” XPO, consisting of the North American LTL and European Transportation segments.

• Fiscal Year 2024: The company reported revenue of $8.07 billion, operating income of $660 million, and net income from continuing operations of $387 million. Adjusted diluted earnings per share (EPS) were $3.83.¹⁴
• Fiscal Year 2023: For the prior year, revenue was $7.74 billion, with operating income of $438 million and net income of $189 million, resulting in a diluted EPS of $1.60.¹⁰
• Fiscal Year 2022 (Continuing Operations): In the first full year post-GXO spin and the year of the RXO spin, continuing operations generated $7.7 billion in revenue, $377 million in operating income, and $184 million in net income, for a diluted EPS of $1.59.⁴³

North American LTL Segment Performance

The North American LTL segment is the primary driver of XPO’s profitability and the focus of its strategic initiatives. Recent quarterly results highlight key operational trends:

• Q2 2025: The segment generated revenue of $1.24 billion, operating income of $199 million, and adjusted EBITDA of $300 million. The adjusted operating ratio (OR), a key measure of efficiency, was 82.9%.¹⁷
• Q1 2025: Revenue was $1.17 billion, with adjusted EBITDA of $250 million and an adjusted OR of 85.9%.¹⁸
• Q4 2024: The segment posted revenue of $1.16 billion, operating income of $179 million, adjusted EBITDA of $280 million, and an adjusted OR of 86.2%.¹⁴

Key Performance Indicator (KPI) Trends and Strategy

A deeper look at the LTL segment’s KPIs reveals a clear and deliberate strategy.

• Yield (Pricing): XPO has demonstrated remarkable pricing power. Yield, excluding the impact of fuel surcharges, has shown consistent and strong year-over-year growth: +6.1% in Q2 2025, +6.9% in Q1 2025, and +6.3% in Q4 2024.¹⁷ This trend points to a successful strategy of focusing on high-quality, profitable freight.
• Tonnage (Volume): In contrast to strong pricing, the company has experienced volume headwinds amidst the broader freight recession. Tonnage per day decreased by 6.7% year-over-year in Q2 2025.¹⁷ However, management commentary indicates that these volume trends are improving relative to typical seasonality and that year-over-year comparisons are becoming less challenging.¹⁶

The divergence between these two key metrics—strong pricing growth alongside declining volumes—is not a passive outcome of market conditions but rather evidence of an active “price over volume” strategy. During the freight recession of 2023-2025, many carriers might be tempted to discount services to fill their trucks and maintain volume. XPO has chosen the opposite path. By leveraging its strong service quality, the company has been able to hold or increase prices on desirable freight, even at the cost of shedding some less profitable volume. This discipline was particularly evident in Q2 2025, when the company was reportedly the only public LTL carrier to achieve a year-over-year improvement in its adjusted operating ratio.¹⁶ This strategy protects profitability during a cyclical downturn and positions the company with significant operating leverage to capitalize on a market recovery. When freight demand returns, XPO will be able to layer new volume into its network at these higher, established price points, which should drive a rapid expansion in margins and profitability.

---

Table 1: Historical Financial Summary (Post-Spin Basis)

Financial Metric	FY 2022	FY 2023	FY 2024
Revenue	$7,700M	$7,744M	$8,072M
Operating Income	$377M	$438M	$660M
Net Income (Continuing Ops)	$184M	$189M	$387M
Adjusted EBITDA	$997M	$996M	$1,266M
Diluted EPS (Continuing Ops)	$1.59	$1.60	$3.23
Source:.10 All figures are for continuing operations to reflect the post-spin-off business structure.

---

Major Strategic Changes & Recent Developments (2022-2024)

The period between 2022 and 2024 has been one of profound transformation for XPO, defined by the final step in its corporate simplification and the aggressive execution of a new, focused growth strategy for its core LTL business.

Completion of Corporate Simplification: The RXO Spin-Off (November 2022)

On November 1, 2022, XPO completed the tax-free spin-off of its tech-enabled brokered transportation platform, which began trading as RXO, Inc. (NYSE: RXO).⁴ This transaction was the culmination of a multi-year strategic plan to separate XPO’s disparate business segments into distinct, “pure-play” public companies. The stated rationale was to allow each company to focus on its unique strategic priorities, tailor capital allocation to its specific market, and ultimately unlock shareholder value that management believed was suppressed within the conglomerate structure.⁹

Following the transaction, XPO was streamlined into its current form: a premier LTL provider in North America with a complementary European transportation business.⁴ RXO, in turn, was launched as the fourth-largest truckload broker in the United States, equipped with a digital freight marketplace and other asset-light services.⁴

Execution of “LTL 2.0” Growth Plan (Q4 2021 – Present)

With the corporate structure simplified, management’s full attention turned to the execution of “LTL 2.0,” a comprehensive, multi-year strategic plan designed to drive profitable growth and significant margin expansion in the North American LTL segment.³⁹ The plan is built on several key pillars: continuously improving network efficiencies to enhance customer service, deploying proprietary pricing technology to accelerate yield growth, making significant long-term investments in network capacity (fleet and terminals), and driving cost efficiencies through initiatives like insourcing linehaul miles.¹⁸

As part of this plan, management has established ambitious long-term financial targets for the LTL business for the period from 2021 to 2027. These targets include achieving a revenue CAGR of 6% to 8%, an adjusted EBITDA CAGR of 11% to 13%, and an improvement in the adjusted operating ratio of at least 600 basis points.¹⁸

Opportunistic Network Expansion: The Yellow Corp. Terminal Acquisition (December 2023)

A pivotal development in the execution of the LTL 2.0 plan was XPO’s acquisition of 28 service centers from the bankrupt Yellow Corporation in December 2023. XPO acquired 26 owned terminals and assumed leases for two additional locations for a total price of $870 million.⁵¹ CEO Mario Harik described the deal as a “once-in-a-generation opportunity” to strategically increase capacity in critical and growing freight markets.⁵²

The integration of these assets has been swift, with nearly all acquired facilities operational as of mid-2025.¹⁶ The strategy is twofold: some locations represent net new additions to the network, while others are larger, more modern facilities that allow XPO to relocate from older, less efficient terminals. A prime example of this strategy was the sale of a legacy terminal in Queens, New York, for $50.1 million after the operations were moved to a larger, more strategically located facility in Brooklyn that was acquired in the Yellow deal.⁵⁴ This single transaction contributed to a $34 million gain from real estate sales in the fourth quarter of 2024, demonstrating a financially astute approach to the integration process.¹⁴

This acquisition should be viewed as a strategic accelerant for the LTL 2.0 plan. The process of organically expanding an LTL network by building new terminals is notoriously slow, capital-intensive, and fraught with zoning and regulatory hurdles. The sudden availability of Yellow’s portfolio of prime real estate ⁵³ allowed XPO to effectively leapfrog what would have been years of organic development. The deal instantly added approximately 2,900 doors to the network and bolstered the company’s presence in key freight markets such as Atlanta, Houston, and Nashville.¹⁰ This rapid expansion directly supports the core LTL 2.0 goals of improving network density, which reduces stem time (the non-revenue-generating time spent driving from a terminal to the first pickup or from the last delivery back to the terminal), and increasing capacity to absorb more freight, thereby enhancing both service quality and operational efficiency.

Industry Headwinds & Company-Specific Challenges

Despite its strategic progress, XPO operates within a cyclical industry and faces several notable headwinds and challenges that are critical to understanding its risk profile.

Macroeconomic Headwinds and the Freight Recession

The most significant near-term challenge has been the persistent softness in the freight market. Since 2023, management has consistently cited a “soft freight environment” and “macro pressure” as the primary reasons for year-over-year declines in freight tonnage and shipment volumes.¹⁶ This cyclical downturn affects all carriers and is driven by factors such as fluctuating inventory levels, industrial production trends, and consumer spending. During the Q2 2025 earnings call, management specifically pointed to “macro tar and tariff uncertainty” as a cause for softer weight per shipment in June, highlighting the sensitivity of the business to broader economic and geopolitical factors.⁵

Labor Market Pressures

The U.S. trucking industry faces systemic labor challenges that create ongoing operational and cost pressures. These include an aging driver workforce, a persistent struggle to attract younger generations to the profession, and a chronic shortage of qualified drivers.⁴¹ This tight labor market puts continuous upward pressure on driver wages and benefits costs, with forecasts pointing to further wage increases.⁴¹ XPO’s 10-K report explicitly identifies the difficulty in attracting and retaining qualified drivers, as well as the potential for increased costs and operational disruptions from efforts by labor organizations to unionize its workforce, as key company-specific risks.¹⁰

Operational and Integration Challenges

The successful integration of the 28 former Yellow terminals, while a major strategic opportunity, is also a significant operational challenge. It requires the seamless alignment of information technology systems, the hiring and training of personnel, and the complex rerouting of freight flows to fully realize the intended network efficiencies. The company’s own risk disclosures acknowledge that unsuccessful acquisitions can lead to integration difficulties, management distraction, and business disruption.¹⁰

The aggressive expansion of its network has created a paradox of excess capacity in the short term. XPO has achieved its strategic goal of having approximately 30% excess door capacity across its network.¹⁶ While this positions the company exceptionally well for a future upswing in freight demand, it creates a negative operating leverage drag during the current freight recession. LTL is a business with high fixed costs associated with its terminals and equipment. Carrying significant underutilized capacity means these fixed costs are spread over a lower volume of revenue-generating shipments, creating a near-term headwind to the company’s operating ratio. The investment thesis is predicated on the idea that when the freight cycle turns, this pre-invested capacity will enable XPO to absorb a surge in volume at very high incremental margins, leading to rapid profit growth. The immediate challenge for management is to diligently manage the costs of this capacity until demand recovers.

European Business Uncertainty

A lingering challenge is the strategic ambiguity surrounding XPO’s European Transportation segment. The company’s Board of Directors has had a long-standing authorization to divest the European business, though there is no certainty regarding if or when a transaction might occur, or on what terms.¹³ This creates an overhang of uncertainty for the segment’s employees and customers, and for investors trying to value the consolidated company. The 10-K report identifies this as a specific risk, noting that a divestiture would result in a smaller, less geographically diversified company more vulnerable to conditions in the U.S. market.¹⁰

Growth Opportunities & Strategic Outlook

Looking forward, XPO’s strategy is oriented around several key growth levers designed to drive market share gains, margin expansion, and long-term shareholder value.

Market Share Gains and Operating Leverage

The 2023 bankruptcy and liquidation of Yellow Corporation, a major national LTL carrier, fundamentally reshaped the competitive landscape by removing significant capacity from the market. This event created a substantial opportunity for the remaining well-capitalized carriers, including XPO, to absorb displaced freight and capture permanent market share.²³ XPO’s concurrent investment in its network, particularly the acquisition of former Yellow terminals, has positioned it to be a primary beneficiary of this market realignment. With an expanded footprint and a stated 30% buffer of excess capacity, the company is structured to handle a significant influx of volume when the freight market recovers.¹⁶ Management has expressed strong confidence in this operating leverage, forecasting that incremental margins during the next cyclical upswing will be “comfortably over 40%”.¹⁶

Yield Growth and Pricing Optimization

XPO intends to continue its disciplined approach to pricing, leveraging its proprietary technology and AI-driven analytical tools to optimize yield.¹³ The consistent, above-market yield growth demonstrated throughout the recent freight recession underscores the effectiveness of this strategy. By focusing on service quality as a differentiator, the company aims to continue commanding premium pricing for its services.

Technology and AI-Driven Efficiency

A central pillar of XPO’s future growth and margin expansion strategy is the deep integration of technology and artificial intelligence into its core operations. While many companies speak of AI in abstract terms, XPO’s management has begun to provide specific, quantifiable operational improvements stemming from its AI initiatives. During the Q2 2025 earnings call, the company reported that its new AI-powered linehaul models were already generating tangible results, including a 3% reduction in normalized linehaul miles, a decrease in empty (non-revenue) miles of over 10%, and a reduction in inefficient freight diversions of more than 80%.¹⁶

These metrics are not abstract; they translate directly into cost savings through reduced fuel consumption, lower driver-hour requirements, and less wear on equipment. The successful application of AI to optimize the monumentally complex routing of its linehaul network represents a significant competitive advantage that directly improves the operating ratio. Furthermore, the company is now piloting AI-driven functionality for its pickup-and-delivery (P&D) operations, suggesting a broader rollout of this efficiency-driving technology.¹⁶ This indicates that a meaningful portion of XPO’s future margin improvement may be driven by these internal, technology-led initiatives, making the company’s performance potentially less dependent on the macroeconomic environment than in the past.

Growth in Premium & Niche Services

XPO is also targeting growth in higher-margin, value-added services. Management has specifically highlighted its grocery consolidation service as a key opportunity. This is an estimated $1 billion niche market with attractive margin profiles where XPO is currently underrepresented but sees significant potential for growth.¹⁶

Capital Allocation & Financial Strategy

XPO’s financial strategy is focused on balancing significant investment for long-term growth with prudent balance sheet management and an emerging focus on direct shareholder returns.

Capital Expenditures (CapEx)

The company is in a phase of elevated investment to support its LTL 2.0 growth plan. The long-term strategy targets average annual capital expenditures in the range of 8% to 12% of revenue through 2027.¹⁸ For the full year 2025, XPO has guided for gross CapEx of $600 million to $700 million, which will be directed toward its fleet, service centers, and technology platforms. These investments are expected to be funded through cash on hand, cash from operations, and available liquidity.¹³

Debt Management

XPO has demonstrated a proactive approach to managing its debt profile. In February 2025, the company successfully refinanced its senior secured term loan facility, extending its major debt maturities out to 2028 and 2031.¹³ This transaction enhances the company’s financial flexibility and reduces near-term refinancing risk. Management has also stated a long-term goal of pursuing an investment-grade credit rating, which would further lower its cost of capital.⁹

Shareholder Returns

A notable evolution in XPO’s capital allocation strategy is the recent emphasis on shareholder returns. In March 2025, the company’s Board of Directors authorized a new, upsized share repurchase program of up to $750 million.¹³ The company began executing on this authorization in the second quarter of 2025, buying back $10 million of its common stock.¹³

The initiation of this meaningful buyback program signals a potential inflection point. After several years dominated by transformative corporate actions and heavy network investment, this move suggests that management is confident in the company’s ability to generate sustainable free cash flow in excess of its significant CapEx requirements. Management’s commentary that it plans to “scale up our buyback activity as our free cash flow increases” reinforces this view.¹⁶ For investors, this marks a shift from a pure growth-investment narrative to a more balanced approach that now includes direct capital returns, introducing a new and tangible avenue for value creation.

Financial Health & Credit Profile

XPO maintains a solid financial position, characterized by adequate liquidity, moderating leverage, and positive cash flow generation.

Liquidity and Leverage

As of June 30, 2025, XPO had total available liquidity of approximately $824 million. This consisted of $225 million in cash and cash equivalents and $599 million in available borrowing capacity under its $600 million Revolving Credit Facility.¹³ Total debt stood at approximately $3.51 billion.¹³ The company has made progress in strengthening its balance sheet, with its net debt leverage ratio improving to 2.5 times trailing twelve-month adjusted EBITDA as of Q2 2025, down from 2.7 times in the prior-year period.¹⁶

Debt Structure and Maturity Profile

The company’s debt is primarily composed of senior secured term loans and senior unsecured notes. Following the successful refinancing in February 2025, XPO has a well-laddered maturity profile with no significant maturities until 2028, providing substantial financial flexibility.

---

Table 2: Debt Maturity Profile (as of Q2 2025 and subsequent refinancing)

Debt Instrument	Principal Amount Outstanding	Maturity Date
Revolving Credit Facility	$0 (drawn)	April 2030
Refinancing Term Loan B-2 Facility	~$700M	May 2028
Refinancing Term Loan B-3 Facility	~$400M	February 2031
7.125% Senior Notes	~$355M	February 2032
6.25% Senior Notes	~$500M	June 2028
Source:.13 Amounts are approximate and reflect major debt tranches.

---

Cash Flow Generation

XPO’s business model has demonstrated its ability to generate healthy cash flow. In the first six months of 2025, the company generated $389 million in cash flow from operating activities, an increase from $355 million in the same period of 2024, showcasing resilience even in a soft freight market.¹³ Continued growth in free cash flow is a key management priority, as it will fund future network investments and shareholder returns.

Valuation Analysis

XPO’s valuation reflects the market’s optimism about its strategic transformation and future earnings potential, resulting in multiples that are at a premium to some industry peers.

Current Multiples and Peer Comparison

As of late July 2025, XPO traded at a Price-to-Earnings (P/E) ratio in the range of 39x to 42x.⁵⁷ This valuation is notably higher than that of several direct competitors. For instance, one analysis showed XPO’s P/E of 36.4x compared to an industry average of 26.0x and a peer average of 26.7x, which included competitors like Saia and J.B. Hunt.⁵⁹ Other data points show ArcBest trading at a P/E of 9.6x and FedEx at 13.2x.⁵⁷ The company’s Enterprise Value (EV) to EBITDA multiple is also elevated relative to historical norms.

The market is clearly assigning a premium valuation to XPO relative to many of its peers. This premium exists despite the company reporting negative tonnage growth in recent quarters, a condition that would typically not warrant such a valuation. This suggests that investors are “looking through” the current cyclical freight downturn and are instead valuing the company based on its anticipated “normalized” earnings power in a recovered freight market. The valuation appears to be a direct endorsement of the company’s strategic transformation. Investors are paying a premium for the significant operating leverage that management has built into the business through its LTL 2.0 plan, network expansion via the Yellow acquisitions, and cost-saving technology initiatives. The market anticipates that these factors will translate into accelerated and outsized EPS growth when the freight cycle inevitably turns positive.

---

Table 3: LTL Peer Group Valuation Comparison

Company	Market Cap	Enterprise Value (EV)	EV/Sales (LTM)	EV/EBITDA (LTM)	P/E Ratio (LTM)
XPO, Inc. (XPO)	$14.0B	$19.9B	2.4x	16.1x	41.2x
Old Dominion (ODFL)	$34.7B	$34.7B	6.0x	22.5x	30.8x
Saia, Inc. (SAIA)	$8.6B	$8.7B	2.7x	11.5x	29.9x
ArcBest Corp. (ARCB)	$2.0B	$2.2B	0.5x	5.8x	11.3x
TFI International (TFII)	$7.5B	$10.1B	1.2x	7.2x	19.8x
Source:.33 Data as of mid-to-late 2025. LTM figures are approximate based on available data. Valuation multiples are dynamic and subject to market changes.

---

Key Risks & Risk Mitigation

As detailed in its 2024 10-K filing, XPO is subject to a range of risks inherent to its business and the transportation industry. A summary of the most salient risks and the company’s corresponding mitigation strategies is provided below.¹⁰

Summary of Key Risks

• Economic and Industry Risk: The company’s performance is highly correlated with the broader economy. A prolonged recession or downturn in industrial activity would negatively impact freight volumes and pricing. The industry is intensely competitive, which could lead to pressure on profit margins. Furthermore, the business is exposed to volatility in fuel prices, which is a major operating expense.
• Operational Risk: A primary risk is the failure to successfully execute the LTL 2.0 growth plan and effectively integrate the acquired Yellow terminals to achieve planned synergies and efficiencies. The business is also exposed to risks from severe weather events, which can disrupt network operations.
• Labor and Third-Party Risk: The ability to attract and retain qualified truck drivers in a tight labor market is a persistent challenge. The company also faces the risk of unionization efforts, which could increase labor costs and reduce operational flexibility.
• Technology and Cybersecurity Risk: XPO’s reliance on proprietary technology and complex IT systems exposes it to risks of system failures, disruptions, and significant cybersecurity breaches, which could impact operations and result in financial and reputational damage.
• Financial and Strategic Risk: The company maintains a substantial amount of debt, and changes in interest rates on its floating-rate debt could impact interest expense. There is also the risk that the company may not realize the full strategic and financial benefits expected from its spin-offs, and the ongoing uncertainty regarding the potential divestiture of the European business remains a strategic risk.

Risk Mitigation Strategies

XPO has implemented several strategies to mitigate these key risks. Notably, many of the company’s primary risk mitigation efforts are deeply integrated with its core competitive advantages and growth initiatives.

• Fuel Price Volatility: To counter the impact of fluctuating fuel prices, XPO utilizes fuel surcharge programs in the majority of its customer contracts, which are designed to pass through a significant portion of fuel cost changes.¹⁰
• Labor Availability: To address the industry-wide shortage of drivers, XPO’s investment in its network of 130 driver training schools creates a dedicated pipeline of new, qualified drivers, reducing its reliance on the competitive open market.¹⁰
• Equipment Sourcing: The company’s in-house trailer manufacturing facility provides a hedge against supply chain disruptions and price volatility in the equipment market.¹⁰
• Competition and Operational Efficiency: XPO’s significant investment in proprietary technology and AI is a key strategy to mitigate competitive pressure by driving down costs and improving service quality, creating a more defensible market position.¹³
• Financial Risk: The company actively manages its balance sheet and liquidity risk, as demonstrated by its February 2025 debt refinancing, which extended maturities and locked in terms, providing greater financial stability.⁵⁶

This integrated approach, where offensive growth strategies simultaneously serve as defensive risk management tools, is a sophisticated corporate strategy. By turning industry-wide challenges such as driver and equipment shortages into its own competitive strengths, XPO demonstrates a proactive approach to risk that is central to its long-term investment case.

Works cited

1. GXO Spin-Off – Investors – XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/investor-resources/gxo-spin/
2. XPO Logistics Spin-Off, GXO Logistics, to Ring NYSE Opening Bell® | XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/news-releases/news-release-details/xpo-logistics-spin-gxo-logistics-ring-nyse-opening-bellr/
3. RXO Spin-Off – Investors – XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/investor-resources/rxo-spin/
4. XPO Completes Spin-Off of RXO, accessed August 5, 2025, https://investors.xpo.com/news-releases/news-release-details/xpo-completes-spin-rxo/
5. $XPO XPO Inc Q2 2025 Earnings Conference Call – YouTube, accessed August 5, 2025, https://www.youtube.com/watch?v=YNkvR-TfLhw
6. Investors – XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/
7. XPO – LTL Freight Quotes and Logistics Services, accessed August 5, 2025, https://www.xpo.com/
8. XPO Logistics Announces Plan to Spin Off Logistics Segment to Its Shareholders, accessed August 5, 2025, https://investors.xpo.com/static-files/e04f3e02-1e83-4a98-b0f8-4c85c7fe1679
9. XPO LOGISTICS, INC., accessed August 5, 2025, https://investors.xpo.com/static-files/6b84079d-b81e-4137-b9c4-b17b51709bd6
10. Form 10-K for XPO INC filed 02/08/2024, accessed August 5, 2025, https://investors.xpo.com/static-files/c991a522-615c-4df6-880c-510d4dfae76f
11. Form 10-K for XPO INC filed 02/07/2025, accessed August 5, 2025, https://xpologisticsinc.gcs-web.com/static-files/bbd8e1d2-c612-49af-9509-569b2ff4aaca
12. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Form 10-K XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/static-files/6850f3d9-0be0-4a4a-b206-5ef9b63a3b07
13. Form 10-Q for XPO INC filed 07/31/2025 – Investors – XPO, Inc., accessed August 5, 2025, https://investors.xpo.com/static-files/69f24498-8aa1-4942-892c-484fdeb99b80
14. XPO Reports Fourth Quarter and Full Year 2024 Results, accessed August 5, 2025, https://investors.xpo.com/news-releases/news-release-details/xpo-reports-fourth-quarter-and-full-year-2024-results/
15. Investor Day Presentation – XPO, accessed August 5, 2025, https://www.xpo.com/cdn/files/s1/XPO_Investor_Presentation_Q2_2025_vF.pdf
16. XPO, Inc. (XPO) Q2 2025 Earnings Call Transcript | Seeking Alpha, accessed August 5, 2025, https://seekingalpha.com/article/4807010-xpo-inc-xpo-q2-2025-earnings-call-transcript
17. XPO Reports Second Quarter 2025 Results, accessed August 5, 2025, https://investors.xpo.com/news-releases/news-release-details/xpo-reports-second-quarter-2025-results/
18. Investor Day Presentation – XPO, accessed August 5, 2025, https://www.xpo.com/cdn/files/s1/XPO_Investor_Presentation_Q1_2025_vF.pdf
19. North America Less-than-truckload (LTL) Market Size & Outlook, 2030, accessed August 5, 2025, https://www.grandviewresearch.com/horizon/outlook/less-than-truckload-ltl-market/north-america
20. United States Less than-Truck-Load (LTL) Market Size & Share Analysis – Industry Research Report – Growth Trends – Mordor Intelligence, accessed August 5, 2025, https://www.mordorintelligence.com/industry-reports/united-states-less-than-truck-load-market
21. Less-Than-Truckload (LTL) Market to Grow by USD 110.7 Billion from 2025 to 2029, Driven by E-Commerce Advances in Retail, Report on How AI is Redefining Market Landscape – Technavio – PR Newswire, accessed August 5, 2025, https://www.prnewswire.com/news-releases/less-than-truckload-ltl-market-to-grow-by-usd-110-7-billion-from-2025-to-2029–driven-by-e-commerce-advances-in-retail-report-on-how-ai-is-redefining-market-landscape–technavio-302377013.html
22. The Impact of E-commerce on Less-Than-Truckload (LTL) Shipping, accessed August 5, 2025, https://ielfreight.com/the-impact-of-e-commerce-on-less-than-truckload-ltl-shipping/
23. 2025 Less-than-Truckload (LTL) Rate Outlook: Change is in the air – Argon & Co, accessed August 5, 2025, https://www.argonandco.com/us/news-insights/articles/2025-less-than-truckload-ltl-rate-outlook-change-is-in-the-air/
24. United States Less-Than-Truck-Load (LTL) Market Size, Share, Trends & Forecast, accessed August 5, 2025, https://www.verifiedmarketresearch.com/product/united-states-less-than-truck-load-ltl-market/
25. Europe Logistics Market Size & Outlook, 2024-2030, accessed August 5, 2025, https://www.grandviewresearch.com/horizon/outlook/logistics-market/europe
26. Logistics in Europe in 2025: what to expect and how to proceed – NTT DATA, accessed August 5, 2025, https://services.global.ntt/en-us/insights/blog/logistics-in-europe-in-2025-what-to-expect-and-how-to-proceed
27. Market Insights ON 2025: Key trends reshaping European logistics and transport – CargoON, accessed August 5, 2025, https://cargoon.eu/en/community/blog/other/market-insights-on-2025-key-trends-reshaping-european-logistics-and-transport/
28. 5 Key Trends Shaping the European Logistics Job Market in 2025 – Talent Odyssey – Hospitality Recruitment Agency Europe, accessed August 5, 2025, https://talent-odyssey.com/logistics-in-motion-5-key-trends-shaping-the-european-logistics-job-market-in-2025/
29. Central And Eastern Europe Freight & Logistics Market Size, Growth, Analysis 2030, accessed August 5, 2025, https://www.mordorintelligence.com/industry-reports/freight-and-logistics-market-in-central-and-eastern-europe
30. LTL Freight: What It Is and How Ecommerce Companies Can Use It for More Cost-Effective Shipping – ShipBob, accessed August 5, 2025, https://www.shipbob.com/blog/ltl-freight/
31. The Benefits of LTL Freight for E-Commerce Businesses – BHX Logistics, accessed August 5, 2025, https://shipbhx.com/news/the-benefits-of-ltl-freight-for-e-commerce-businesses/
32. How LTL Shipping Helps E-Commerce Brands Navigate Tariffs, accessed August 5, 2025, https://www.sdcexec.com/transportation/ocean-ports-carriers/article/22939324/warp-how-ltl-shipping-helps-ecommerce-brands-navigate-tariffs
33. XPO (XPO) Competitors and Alternatives 2025 – MarketBeat, accessed August 5, 2025, https://www.marketbeat.com/stocks/NYSE/XPO/competitors-and-alternatives/
34. Old Dominion Freight Line, Inc. (ODFL), accessed August 5, 2025, https://ir.odfl.com/
35. Subscribe to Saia’s RSS Feed | Saia, accessed August 5, 2025, https://www.saia.com/about-us/investor-relations/rss-subscription
36. ArcBest – Investor Relations, accessed August 5, 2025, https://investors.arcb.com/overview/
37. Top XPO Logistics Competitors & Alternatives 2025 | Gartner Peer Insights, accessed August 5, 2025, https://www.gartner.com/reviews/market/third-party-logistics/vendor/xpo-logistics/alternatives
38. Top XPO Logistics Transportation-Related Services Competitors & Alternatives 2025, accessed August 5, 2025, https://www.gartner.com/reviews/market/third-party-logistics/vendor/xpo-logistics/product/xpo-logistics-transportation-related-services/alternatives
39. Notice of 2022 Annual Meeting – Annual Reports, accessed August 5, 2025, https://www.annualreports.com/HostedData/AnnualReportArchive/x/NYSE_XPO_2021.pdf
40. XPO (XPO) Q4 2022 Earnings Call Transcript – The Motley Fool, accessed August 5, 2025, https://www.fool.com/earnings/call-transcripts/2023/02/09/xpo-xpo-q4-2022-earnings-call-transcript/
41. Driver Market Forecast – 2025 – The National Transportation Institute, accessed August 5, 2025, https://driverwages.com/driver-market-forecast-2024-full-forecast-nti/
42. 60+ Trucking Industry Statistics: Trends + Outlook [2025] – Geotab, accessed August 5, 2025, https://www.geotab.com/blog/trucking-industry-statistics/
43. XPO Q4 2022 Earnings Press Release vF2, accessed August 5, 2025, https://www.xpo.com/cdn/files/s24/XPOQ42022_EarningsPress_ReleaseVF85.pdf
44. Notice of 2023 Annual Meeting, accessed August 5, 2025, https://www.annualreports.com/HostedData/AnnualReportArchive/x/NYSE_XPO_2022.pdf
45. Investor Day Presentation – XPO, accessed August 5, 2025, https://www.xpo.com/cdn/files/s1/XPO_Investor_Presentation_Q4_2024_vF.pdf
46. XPO Logistics Inc Investor Relations – Alpha Spread, accessed August 5, 2025, https://www.alphaspread.com/security/nyse/xpo/investor-relations
47. XPO Logistics Announces Plan to Create Two Standalone, Publicly Traded Industry Leaders in Less-Than-Truckload and Tech-Enabled Brokered Transportation, accessed August 5, 2025, https://investors.xpo.com/news-releases/news-release-details/xpo-logistics-announces-plan-create-two-standalone-publicly/
48. 1 RXO Investor Day, October 18, 2022 Management discussion …, accessed August 5, 2025, https://investors.xpo.com/static-files/715b99b3-98d1-43d1-9e51-034c8a39a34e
49. RXO Investor Day, accessed August 5, 2025, https://s201.q4cdn.com/733042408/files/doc_presentation/2022/10/RXO-Investor-Presentation-October-2022.pdf
50. Investor Day Presentation – XPO, accessed August 5, 2025, https://www.xpo.com/cdn/files/s24/XPO_Investor_Day_Presentation_October_2022.pdf
51. Big US LTL Carriers Take Yellow’s Terminals in Auction, PRIMO’s Network Remains Undisrupted – Logistics Freight`s Site, accessed August 5, 2025, https://heyprimo.com/big-us-ltl-carriers-take-yellows-terminals-in-auction/
52. XPO Approved to Acquire 28 Service Centers as Part of Yellow’s Chapter 11 Bankruptcy, accessed August 5, 2025, https://news.xpo.com/2990/xpo-approved-to-acquire-28-service-centers-as-part-of-yellow-chapter-11/
53. XPO In Line for 28 Yellow Properties for $870 Million – TT – Transport Topics, accessed August 5, 2025, https://www.ttnews.com/articles/xpo-yellow-terminal-auction
54. XPO sells terminal in New York City for $50M – Trucking Dive, accessed August 5, 2025, https://www.truckingdive.com/news/xpo-sells-new-york-terminal-relocates-yellow-facility/739419/
55. Earnings Call Summary | XPO(XPO.US) Q2 2025 Earnings Conference – Moomoo, accessed August 5, 2025, https://www.moomoo.com/news/post/56243047/earnings-call-summary-xpo-xpous-q2-2025-earnings-conference
56. XPO XPO INC Capital Structure Changes 8-K Filing – stockinsights.ai, accessed August 5, 2025, https://www.stockinsights.ai/us/XPO/8-K/capital-structure-changes-20250226-d32
57. XPO Logistics PE ratio, current and historical analysis – FullRatio, accessed August 5, 2025, https://fullratio.com/stocks/nyse-xpo/pe-ratio
58. XPO Logistics, Inc. – Enterprise Value – Wisesheets, accessed August 5, 2025, https://www.wisesheets.io/enterprise-value/XPO
59. XPO (NYSE:XPO) Stock Valuation, Peer Comparison & Price Targets – Simply Wall St, accessed August 5, 2025, https://simplywall.st/stocks/us/transportation/nyse-xpo/xpo/valuation
60. International bonds: XPO, 6.75% 15aug2024, USD (USU9840VAG87) – Cbonds, accessed August 5, 2025, https://cbonds.com/bonds/534371/
61. RXO Earnings Presentation, accessed August 5, 2025, https://s201.q4cdn.com/733042408/files/doc_financials/2024/q3/RXO-Earnings-Presentation-Q3-2024.pdf
62. TFII Investor Relations – TFI International Inc – Alpha Spread, accessed August 5, 2025, https://www.alphaspread.com/security/tsx/tfii/investor-relations