XPO Stock Rises as U.S. Trade Policies Shift

XPO Stock Rises as U.S. Trade Policies Shift

Highlights:

XPO shares soared in 2024, outperforming competitors in transportation through strong revenue growth, cost management, and operational efficiency.

Anticipated tariffs from the incoming administration could spur local manufacturing, boosting domestic transport demand.

However, FedEx's revised guidance in December tempered XPO's year-end rally.

As the U.S. prepares for policy shifts under President Donald Trump, the incoming administration’s focus on tariffs could significantly raise the cost of importing goods. This could lead to increased domestic production and manufacturing activity in 2025. Despite this potential, current manufacturing data suggests a contraction: the December 2024 U.S. Manufacturing PMI dropped to 48.3 from 49.7, remaining below the growth threshold of 50.

Transportation and logistics companies, critical players in the manufacturing ecosystem, stand to benefit from any surge in domestic production. Less-than-truckload (LTL) freight providers like XPO Inc. (NYSE: XPO) and Old Dominion Freight Line (NASDAQ: ODFL) are key connectors between manufacturers and end consumers. Among these, XPO has emerged as a clear leader, with its stock surging 57% in 2024, while ODFL shares declined by over 9% during the same period.

XPO’s Competitive Edge: Revenue Growth and Operational Strength

XPO serves a diverse client base spanning industrial, manufacturing, retail, consumer goods, and logistics sectors. Its success stems from strategic pricing and operational efficiency, as highlighted by ClearBridge Investments, which lauded XPO’s “healthier industry structure and better pricing dynamics” compared to competitors like UPS (NYSE: UPS).

In its third-quarter results, XPO showcased its dominance with a 3.7% year-over-year revenue increase, driven by both North American and European operations. Notably, its North American LTL segment posted a 16.5% rise in adjusted operating income, achieving an adjusted operating ratio of 84.2%.

The company also demonstrated improved revenue per shipment and operating leverage, signaling efficient operations and sustained growth potential. Additionally, the North American LTL business boosted its adjusted EBITDA to $284 million, up from $241 million a year earlier, attributed to higher yields (excluding fuel) and lower transportation costs.

XPO’s consistent performance and strategic positioning make it a standout player in the transportation sector as the U.S. trade landscape evolves.