UBS on XPO Logistics: Highlights from a fireside chat with Brad Jacobs

“On Wednesday afternoon we hosted a fireside chat with XPO’s CEO Brad Jacobs and the UBS equity sales team. The discussion was upbeat in terms of both cyclical tailwinds and also traction on XPO’s initiatives. We expect XPO to deliver strong performance in its LTL and brokerage divisions in 2021 and we also anticipate acceleration in the pace of operating income growth within XPO’s Logistics segment. In our view, the anticipated 2H21 spin out of Logistics is also a positive catalyst for XPO stock.”

With regard to pricing + productivity “supporting strong OR improvement in LTL”, it noted that “XPO provided an upbeat view on trends in their LTL business pointing to stronger pricing in December and January and the expectation of a meaningful tailwind from a cyclical upturn in the industrial economy. We are modeling 257 bp of LTL OR improvement in 2021 but setting aside a large step change in 2Q21 versus a very easy comparison, our model only assumes about 100 bp of y/y improvement in 1Q, 3Q and 4Q21 which leaves room for potential upside.”

The full note is here.