XPO NYSE: XPO reported record second-quarter results, led by growth in its North American less-than-truckload business, higher pricing and productivity gains from technology initiatives. The company said it expects further margin improvement, faster free-cash-flow growth and continued volume momentum in the second half of 2026.
Total revenue rose 13% year over year to $2.4 billion, while LTL revenue increased 15% to $1.4 billion. Adjusted EBITDA totaled $434 million; excluding $9 million of real estate gains, adjusted EBITDA increased 25% from a year earlier to $425 million. Operating income rose 37% to $271 million, and net income was $162 million, or $1.36 per diluted share. CFO Kyle Wismans said adjusted diluted earnings per share were $1.70, and excluding real estate gains, adjusted EPS increased 56% year over year.
LTL margins reach record level
The company’s LTL segment generated adjusted operating income of $287 million, up 36% year over year, and adjusted EBITDA of $390 million. The segment’s adjusted EBITDA margin improved 310 basis points to 27.3%.
Most notably, XPO’s adjusted operating ratio in LTL improved 300 basis points from the prior-year quarter to a record 79.9%. Chairman and CEO Mario Harik said the company has improved its operating ratio by nearly 800 basis points over the last three years, despite what he characterized as a historic freight recession.
“We’re building our network for years of above-market pricing growth and profitable market share gains,” Harik said.
For the third quarter, Harik said XPO expects its LTL operating ratio to remain below 81%, despite normal seasonality that would typically cause the ratio to rise 200 to 250 basis points sequentially from the second quarter. He said the outlook reflects pricing, accelerating volumes and cost efficiency.
The company now expects full-year operating-ratio improvement of at least 200 basis points, compared with its prior outlook for improvement of 100 to 150 basis points.
Volumes and pricing strengthen
LTL shipments per day increased 2.8% in the second quarter, while weight per shipment declined 1.8%, producing tonnage-per-day growth of 1%. Volume trends improved during the quarter: shipments per day increased 0.2% in April, 3.3% in May and 5.1% in June. Tonnage per day moved from a 1.5% decline in April to increases of 0.5% in May and 4% in June.
Chief Strategy Officer Ali Faghri said July trends continued to improve, with estimated year-over-year growth above 6% in both shipments per day and tonnage per day, while weight per shipment was roughly flat. XPO expects third-quarter tonnage to increase in the mid-single-digit range year over year, assuming above-seasonal trends continue.
Yield excluding fuel rose 4.4% year over year in the second quarter, supported by faster contract-renewal pricing. Wismans said renewal pricing reached the mid- to high-single-digit range. The company expects both yield and revenue per shipment, excluding fuel, to improve sequentially in the third and fourth quarters.
Harik said XPO sees a long-term opportunity to outperform market pricing by roughly two to three percentage points annually through improved service, premium offerings and growth with small and midsized customers. He said the company expects to add about one point of incremental pricing from service improvements, one point from premium services and roughly half a point from the customer mix over time.
Technology and capacity investments support efficiency
XPO attributed part of its margin expansion to proprietary technology and network investments. The company said workforce-planning technology improved productivity by nearly 2.5 points year over year in the second quarter, exceeding its 1.5-point quarterly target.
More than two-thirds of XPO’s operations are using route-optimization technology for pickup and delivery, which the company said has reduced miles and increased stops per hour. A trailer-loading technology pilot that uses artificial intelligence to evaluate freight-loading images improved load quality by more than 40% and reduced damages by 50% at pilot sites, according to Harik.
The company plans to deploy the trailer-loading technology throughout its network during the second half of the year. XPO also reported that its damage claims ratio was below 0.2% for the second consecutive quarter, its best level to date.
Harik said the company has expanded its trailer fleet by more than 30%, tractor count by more than 20% and network door capacity by 15% since 2021. XPO believes its existing workforce and additional labor hours can support another low- to mid-single-digit increase in shipments, while it has already increased hiring in selected markets.
Cash flow outlook and European business
XPO generated $207 million of free cash flow in the second quarter and ended the period with $298 million in cash and approximately $898 million in total liquidity. The company spent $101 million on net capital expenditures, repurchased $70 million of common stock and repaid $70 million of term-loan debt during the quarter.
In July, XPO repaid another $100 million of its term loan, bringing year-to-date debt reduction to $200 million. Net leverage improved to 2.1 times trailing-12-month adjusted EBITDA from 2.3 times at the end of the first quarter.
Wismans said XPO now expects to more than double full-year free cash flow from 2025 levels, aided by earnings growth and moderating capital expenditures. Over the cycle, he said the company believes it can generate incremental margins of at least 40%.
In Europe, XPO reported record revenue and its 10th consecutive quarter of constant-currency growth. Adjusted EBITDA increased 9% year over year to $48 million. Harik said the company expects European EBITDA growth to reach the high teens in the second half, helped by cost actions, sales investments and expansion into verticals including luxury goods, aerospace, healthcare and technology.
Harik reiterated that XPO ultimately intends to sell its European business when it can obtain what it considers the right price, with proceeds intended to support additional capital returns to shareholders.
About XPO (NYSE:XPO)
XPO Logistics, Inc is a global provider of transportation and logistics services, offering a broad portfolio of solutions designed to optimize supply chains for businesses of all sizes. The company's operations span freight brokerage, less-than-truckload (LTL) shipping, full truckload transportation, last-mile delivery, contract logistics and global forwarding. XPO aims to leverage advanced technology and operational expertise to drive efficiency, visibility and reliability across end-to-end supply-chain networks.
In its freight brokerage segment, XPO connects shippers to a network of carriers through digital platforms that facilitate rate comparisons, booking, tracking and settlement.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
Before you consider XPO, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and XPO wasn't on the list.
While XPO currently has a Moderate Buy rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
Learn the basics of options trading and how to use them to boost returns and manage risk with this free report from MarketBeat. Click the link below to get your free copy.
Get This Free Report
