Some of you will remember Expeditors. Sauk brought it to the board quite some time ago. He was banking mostly on the track record of the CEO who had entered a deeply fragmented industry and via acquisition and organic growth turned his company into a powerhouse leader of the industry.

Well, I’ve not done recent analysis of XPO but it’s now, on my to-do list. Why? Well, I just received some furniture purchased on Ebay and the delivery showed up in a big white truck with XPO in big black letters on the side of the trailer. I remember the CEO saying something about putting concentration on the “last mile.” And the delivery demonstrates that he must be executing.


I sold XPO when they bought the French trucker. I still think that was a bad idea.

Denny Schlesinger

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This is from a little over a year ago, but this is a great thread on XPO. Be sure to read the original post by Neil and then Ray’s response later in the thread if you’re interested in the company.


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I’m pretty sure it featured as an SA pick as well.
(Stock Advisor)

XPO has halved for me and now recovered, hence a double for those buying at the recent bottom. I have sold most of my holding because the share price gyrations are not good for my health, however I kept a small participation because I do believe that there is a great chance of this CEO fulfilling on his promises. He is running a levered company but the cash flow is now piling in to service that debt without undue challenge. Me thinks XPO is at a positive inflection point

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Bradley Jacobs (XPO Logistics) is offering last mile delivery (LMD). Jeff Bezos needs last mile delivery. There might be some symbiosis there.

Uber might make for better LMD for small items.

An LMD startup?

Just brainstorming LMD.

Denny Schlesinger


Drones I think will service LMD for small packages, roughly under 2KG (4.25 Lbs). Uber (or manned) but driverless vehicle will service for packages roughly between 2KG and 20KG. Over that and you start getting into a lot of sticky OSHA regulations. I had a coffee table and end table delivered. Two,packages too large for a passenger car (an SUV or small truck would have been sufficient). But the delivery vehicle was a semi. I’m aure the driver had several large, heavy deliveries before he got to me at about 7:00 PM. Large, manned vehicles with moving equipment will be required for years to come to handle this class of delivery.

I sold XPO when they bought the French trucker. I still think that was a bad idea.

Me too. It changed them from capital-lite to capital-intensive.


Here’s a bit of my personal experience with one of Mr. Jacobs former companies, Waste Management.

So, I’m not exactly where I was in the cycle, but about 30 years ago when I moved into my current dwelling the garbage company (that’s what we called it) was something different, Allied Waste (maybe). Anyway, every truck had three guys, a driver and two guys that hung off the back of the truck. The two guys in back would jump off at every stop, pick up the cans at the curb and dump the garbage in the truck. Hop back on, and off to the next stop.

Later, they became Republic Services. But from my perspective not much else changed. Later still they kept the name, but all the trucks are now labeled “Waste Management.”

Not long after that a lot changed. They distributed uniform, wheeled bins to all their customers at very low monthly rates. But the big change was mainly the trucks and coincidentally, the labor requirements.

Soon all the trucks only had one guy on board, they’re equipped with “arms” that reach around the bins, pick them up and dump the garbage into the back of truck. All the trucks are powered by natural gas.

About those other two guys? Where I live we have three pick-ups. Land-fill bound garbage, recyclables and organics. So you could say they still have jobs, doing less arduous work and probably better pay. But actually, I don’t know how guys (all men) moved from the back of the truck to the front.

My point is, that took a lot of capital investment, not too sure the labor went down, my guess is they hired more folks to working at the recycling and composting plants (somebody did anyway).

Waste Management may not be a stellar growth company, but it’s a solid long term investment.

So, I’m no all that sure that changing capital deployment is a bad thing. If it helps XPO grow bigger, faster with increasing earnings it might be right thing. It might be worth keeping an eye on it again is all I’m really saying right now.


Probably they were not re-employed. This is, and is ever more going to be one of the big problems of our age. Machines are understandable, do not get sick, are not unionized, do not require a personnel department for vast workfare projects which government demands businesses undertake, and the rest. As a result, machines are beautiful. Someone fetch a grease-gun and we’re done. And at the bottom end of the scale, each and every reference to a minimum wage has, as a direct corollary, an employer looking at the latest catalog of machine-tools or robotics.

Computer games will not cut it. I recommend fishing.


I own a medium size position of XPO having bought 2/20/15 at $41.87, three other purchases in Sept-Oct 2015 at $24.50 - $30 and a final purchase through put assignment in Feb of this year at $25.69.

I like the moves made by Jacobs and company. The move into owned trucks from only brokerage gave me pause. But I know the industry is very short of drivers worldwide and having the access to the drivers and their trucks provides some moat for their services. If you only operate a freight brokerage you don’t have the same competitive advantage as full service logistics company with owned assets. The move to sell the truckload side of the trucking business (Conway Truckload) in the US is the right one as the truckload business is more competitive than the LTL business with much lower margins.

I’m happy with the performance of the company and their ability to generate cash flow. The debt load is high currently so I will look for them to pay some of that down first before continuing the roll up strategy.


If you only operate a freight brokerage you don’t have the same competitive advantage as full service logistics company with owned assets.

Had it not been in France, I’d let the purchase pass but in France the workers reign supreme and lots of American companies have come to grief at the mercy of their unions. No French labor intensive investments for me.

Denny Schlesinger


The debt load is one of the big reasons that the recent inflection point (from cash flow losses and negative EPS to positive EPS and not only CFFO but even FCF) is so important.

Debt is a problem for a company that has never shown a profit. The huge drop in share price from over $50 in mid-2015 to below $20 in January was the market fearing that the company would eventually go broke buying their own growth with debt. If they were profitable, they could begin to pay down the debt, but the market wasn’t convinced that would ever happen.

Well it happened. They turned profitable (to a surprising degree) two quarters ago, and we have seen the shares appreciate mightily. The shares moved from the mid to high 20’s to the mid to high 30’s after the June quarter, and after some pullback to the low 30’s, they’ve now jumped into the low 40’s since the Sep quarter continued the trend.

EPS the last four quarters:


To know how big of a deal this inflection point is, it’s important to understand how little the market was expecting from XPO. The answer is, very little. P/S ratio was around 0.30. The market simply didn’t believe the company or analysts. In fact, estimates for EPS in 2017 have actually come down from 1.76 to 1.70 in the last 90 days. Meanwhile, shares have appreciated, because the market didn’t believe it at 1.76, but actually sees the plausibility now.

FWD P/E = 25 based on the 1.70 per share, which could end up being a steal if they continue to improve margins, and let’s not forget grow revenue, from here. I believe they will continue their growth plan, even as it finally takes a bit of a backseat to stabilization and profit.

Oh and by the way, at current revenue levels, that 1.70 EPS would be a profit margin of 1.5% on the well over $100 per share of revenue they are currently generating each year. I don’t think that sounds crazy…unless it’s crazy low. It’s not a high-margin business, but let’s see how far they can go.



for those interested:


on XPO:

The serial acquirer of transportation and logistics businesses - more than a dozen acquisitions since 2011 - including Con-way Inc., which it acquired last year for $3 billion - recently sold Con-way’s truckload business to Canadian trucking firm TransForce Inc (OTCMKTS: TFIFF ) for $558 million in a move to reduce the $5 billion in debt taken on to make all of these acquisitions.

Not a pivotal piece of Con-way’s business, TransForce’s offer was simply too good to pass up.

If you thought Pure Storage was a big revenue grower, XPO Logistics Inc (NYSE: XPO ) is out of this world, having growing its revenues from $177 million in 2011 to a top ten global transportation and logistics company with $10.9 billion in revenue through the first three quarters of fiscal 2016 and estimated full-year revenues of more than $15 billion.

Most importantly, XPO generated free cash flow in Q3 2016 of $65 million and expects to be free cash flow positive for the entire year. Amazingly, it’s got a good chance to reach its adjusted Ebitda goal of $1.6 billion by fiscal 2018. And only seven years after CEO Bradley Jacobs and investors put $150 million into XPO, then called Express-1 Expedited Solutions, to gain majority control. Today, Jacobs Private Equity owns approximately 15% of XPO’s shares and 23% of the votes.

XPO turned in another solid quarter yesterday…steady improvement continues.


To me, the highlights related to cash flows:

2015: 90.8M
2016: 625.4M

2015: -167.9M
2016: +210.9M

FCF goal for the next 2 years combined is 900M…and they’ve been making a habit of hitting and exceeding their goals.

Also, this company is still in the bargain bin, with a PS of 0.45. Their PE ratio of ~50 doesn’t sound especially inexpensive until you realize:

  1. they’re only 3 quarters into profitability (since they hit their inflection-point)
  2. Fwd PE is under 30
  3. 2-yr Fwd PE is under 20
  4. Net Margin is currently less than 1% on a TTM basis, so there’s a LOT of room to run
  5. They’re rapidly growing cash flows, EPS, etc, and it’s highly likely they’ll beat estimates at this early stage in the game of showing profit.

Shares were up more than 12% this morning but quickly settled back down and are now up only 4% on these great results. I just added more.