Analysis: takeover bid for XPO Logistics just a matter of time – and share price
The reason why I have not downgraded my personal fair value (FV) estimates of US-based ...
XPO Logistics yesterday reported double-digit increases in both revenue and profit in its 2018 full-year results.
But the operator warned that a weaker fourth quarter had pushed it to lower its forecasts for 2019.
It reported full-year revenue of $17.28bn, a 12.3% increase over the $15.38bn in 2017, while adjusted ebitda increased 14.3% to $1.56bn, compared with $1.37bn the year before.
Meanwhile, fourth-quarter revenue increased to $4.39bn, compared with $4.19bn in the same period in 2017, and adjusted ebitda was $380m, compared with $337m last year. But that excluded $26m of litigation costs for “independent contractor matters”; a $24m gain on the sale of an equity investment; $19m of restructuring costs, primarily severance; and $8m of “transaction, integration and rebranding costs”, the company said.
However, XPO has reduced its growth forecast for this year, warning of worsening economic conditions in Europe and future reduced business with one of its largest customers, with 2019 adjusted ebitda now forecast at $1.65bn-$1.72bn, representing growth of 6%-10%, compared with its previous target of 12%-15%.
This year’s free cash flow is now targeted at $525m-$625m, versus the prior target of around $650m.
Chief executive Brad Jacobs explained: “This anticipates the impact of our largest customer substantially downsizing its business portfolio with us, starting in the first quarter, as well as our more cautious view of Europe.
“We updated our target for free cash flow to align with our adjusted ebitda forecast and our expectation of higher interest expense associated with our new share repurchase authorisation. As we look ahead, we’re confident in our ability to create meaningful shareholder value.”
Earlier this week, the company announced a second share repurchase programme, to follow the one that opened in December and completed on 4 February and saw 18m XPO shares “retired” for $1bn.
This week, XPO’s board authorised the new share repurchase programme of up to $1.5bn, which it “intends to fund with available cash from operations and financing sources”.
Breaking down its results, its transport arm generated revenue of $2.83bn for the fourth quarter, marginally higher than the $2.78bn in the same period last year, “led by less-than-truckload in North America and Europe, and by European truckload and freight brokerage”. Adjusted ebitda for transport grew to $272m, compared with $264m in the same period in 2017.
The company’s logistics segment grew 10% year on year to $1.59bn for the quarter, and adjusted ebitda increased 11.4% year on year to reach $127m, reflecting “the impact of a record 118 contract start-ups in 2018, including 28 in the fourth quarter”.
It added: “Segment revenue growth was led by rising demand for e-commerce logistics globally, and by the consumer packaged goods and food and beverage sectors in North America and the fashion sector in Europe.”