XPO reported second-quarter results that exceeded analysts’ expectations, driven by record performance in its less-than-truckload (LTL) division. The company credited a stronger freight mix and AI-powered operational improvements for the results, while maintaining an optimistic outlook for pricing across the LTL market.
Management said the industry remains in the early stages of what it expects to be a multiyear cycle of double-digit rate growth. XPO believes investments in its service network will allow it to achieve pricing increases that outperform competitors by two to three percentage points. The company also continues to attract more shipments from small and medium-sized businesses (SMBs) and freight generating additional accessorial charges, both of which support higher margins.
For the second quarter, XPO reported adjusted earnings of $1.70 per share, beating consensus estimates by 23 cents and improving 65 cents from the same period last year. The adjusted figure excluded restructuring and transaction-related costs and included a 6-cent benefit from gains on real estate sales.
Consolidated revenue reached $2.36 billion, an increase of 13% year over year and approximately $85 million above analysts’ expectations.
The company’s LTL segment generated $1.43 billion in revenue, up 15% from a year earlier. Excluding fuel surcharges, revenue increased 5%, while diesel prices during the quarter were roughly 50% higher than the previous year.
Freight tonnage increased 1%, supported by a 3% rise in daily shipment volumes, although average shipment weight declined 2%. Yield improved 14%, or 4% excluding fuel surcharges, helped by a 1% increase in average length of haul and lighter shipments, which positively affected revenue per hundredweight.
Freight demand strengthened throughout the quarter. Compared with the previous year, tonnage declined 1.5% in April, increased 0.5% in May, rose 4% in June, and is currently running more than 6% higher in July. Daily tonnage also increased 4.5% from the first quarter to the second quarter.
Looking ahead, XPO expects stronger-than-normal seasonal demand to support mid-single-digit year-over-year tonnage growth during the third quarter.
The company continues gaining market share among SMB customers, whose shipments are generally lighter but generate higher profitability. Both yield and revenue per shipment, excluding fuel surcharges, improved compared with both the previous year and the prior quarter, matching management’s expectations.
XPO’s LTL business achieved a record adjusted operating ratio of 79.9%, improving 300 basis points year over year and 400 basis points sequentially from the first quarter. The result exceeded management’s own guidance by 100 basis points.
Revenue per shipment also outpaced adjusted cost per shipment by nearly 400 basis points, reflecting continued pricing discipline and operational efficiency.
Although the company typically experiences operating ratio deterioration of 200 to 250 basis points between the second and third quarters, management now expects an adjusted operating ratio of below 81% in the third quarter, supported by stronger pricing and additional efficiency initiatives.
Based on this performance, XPO raised its full-year margin outlook. The company now expects at least 200 basis points of year-over-year improvement, compared with its previous forecast of 100 to 150 basis points.
Management also said it now sees a long-term path toward annual operating ratios in the low-70% range or better, noting that the company has already improved its operating ratio by approximately 800 basis points throughout the recent freight downturn.
Outside North America, XPO’s European transportation division reported $927 million in revenue, representing 10% year-over-year growth. Adjusted EBITDA increased 9% to $48 million, supported by investments in sales personnel targeting selected industry sectors alongside ongoing structural cost reductions.
The company also confirmed that it continues to pursue plans to divest its European transportation business, allowing XPO to become a pure-play less-than-truckload carrier.
Following the earnings announcement, XPO shares were down 0.2% in midday trading, while the S&P 500 gained 1.3%. Despite the modest daily decline, the company’s stock has risen 43% since the beginning of the year.
