(For a review of some of the data in RXO’s earnings, please go here.)
With another quarter of operating and net losses in the book, RXO management on its first-quarter earnings call pursued several paths to accentuate the positive.
There was really only one question on the call about when the giant 3PL might return to profitability, even though it would not take a major turnaround in markets for black ink to replace red ink.
But if the analysts didn’t seem overly concerned about the performance of RXO, Wall Street was. Even on a day when equities overall rose, RXO stock at 12:30 p.m. was down 5.31%, to $13.03 (NYSE: RXO). The 52-week low of $12.19 was recorded April 21. RXO shares are down either side of 35% for both the year and the past three months.
The positives that RXO management highlighted on the call started with the pace of implementing and digesting the acquisition of Coyote Logistics from UPS, a deal that closed in September. But various key performance indicators also came in for positive mentions.
CEO Drew Wilkerson, addressing the financial performance of the company, noted that earnings before interest, taxes, depreciation and amortization of $22 million was in line with what RXO management had projected earlier. RXO also recorded an operating loss of $30 million, compared to an operating loss of $12 million in 2024’s first quarter. The net loss of $31 million translated to diluted earning per share of negative 18 cents. It was negative 13 cents a year ago.
Chief Strategy Officer Jared Weisfeld, in prepared remarks on the call, said RXO’s brokerage volume was down 1% year over year, which he said was better than the company’s expectations.
Big gains in LTL
And all of it, he said, came from its LTL business, which saw volume up 26% year over year – “the result of successfully onboarding new customers.”
RXO’s LTL business was 25% of its volume in the first quarter, which was up 500 basis points compared to the first quarter of 2024.
With those kinds of gains in the LTL business in a market growing nowhere near the size of the gains at RXO, an analyst asked Wilkerson how it’s managing to grab market share.
It isn’t price, he said: “If you’re looking for price as a lever, that’s not how we do business. We want to price in line with the overall market.”
Wilkerson then laid out the broad view: “The biggest thing that we’re seeing right now is that a lot of times LTL can be a pain point for customers. It’s a small piece of their revenue spend, and it’s a small piece of their overall volume. But when you talk about tracking, when you talk about claims that come in, you talk about lost shipments, you talk about working with multiple different carriers for something that’s a small piece of their business. They’re familiar with us from the service that we’ve provided from the truckload side. So we’re winning with large enterprise customers that are coming to us and giving us the opportunity to service LTL in addition to truckload. We’re just getting started in LTL.”
Truckload volume falls
The growth in LTL against a backdrop of total volume that was mostly flat means full truckload volume was down 8% from the corresponding quarter of 2024, “impacted by continued soft freight market conditions,” Weisfeld said. RXO’s automotive business in truckload was down more than 25% year over year.
The split on contract versus spot business in truckload was 73% contract and 27% spot, Weisfeld said. “We continued to operate in a prolonged soft environment with minimal spot opportunities,” he said.
Weisfeld also said RXO expects 2025 contract rates to rise by low to mid-single digits this year compared to 2024.
Other positive KPIs touted by Weisfeld include revenue per load, exclusive of fuel and length of haul, rising 4% year over year. The specific number on revenue per load was not disclosed.
The earnings call presentation for RXO showed significant growth in LTL volume and gross profit per load, though the company does not reveal the actual numbers used in the chart.
There were conditions cited by Weisfeld that would have suggested the trucking market deteriorating after earlier gains, such as a drop in tender rejection rates from 7% at the start of the quarter toward 5% by the end. But he also said the truck-to-load ratio had tightened from 7-to-1 to less than 5-to-1.
The end result, Weisfeld said, is that the overall strength in industry KPIs was “consistent with our view that capacity had exited the market, which brought the industry to a more balanced state in the quarter.”
Weisfeld also ticked off several points in RXO’s outlook for the second quarter. Overall volume is expected to decline by a low-single-digit percentage compared to 2024, “with continued soft truckload volume trends, mostly offset by strong LTL growth,” he said. Gross profit per load – also a number not disclosed by RXO – will move higher in the quarter, resulting in a gross margin of 13%-15%. It was 13.3% in the first quarter.
Market softness continued into April, with full truckload volume down “roughly mid-single digits” sequentially from March, Weisfeld said in response to an analyst question. That is a reversal from the norm, he added. The normal ramp-up of business into June is not assumed in the company’s forecast, according to Weisfeld.
RXO’s estimate now is that it will gain $70 million in cash savings from the integration of Coyote. That is up from $50 million that was estimated three months ago.
Gains to come on purchased transportation
But RXO management has said repeatedly that the estimate does not include the benefits from combined purchased transportation savings. No number has been put on that, but Wilkerson suggested it would be substantial.
“If we’re only able to improve that by 1%, that will be around $40 million of what we buy,” Wilkerson said. “You look at doubling our volume in brokerage and being able to spread our cost out across more loads, which essentially lowers our cost to serve our customers and make us more profitable.”
As with all earnings calls this quarter, tariffs were a topic of the day. Wilkerson’s answer sounded similar to what has been heard on many other calls.
“We’ve got some customers that have pulled inventory ahead,” he said. “We’ve got some that have paused completely, and we’ve got some that have continued shipping as normal.”
Wilkerson was asked a question by an analyst that included a term the trucking and logistics market has started using widely in recent weeks: the “air pocket.” It’s a reference to the sudden drop in Chinese imports to U.S. West Coast ports that is expected to take hold in coming days and weeks as a result of tariffs.
The CEO said the company was “well aware” of that coming decline but added that it may present an opportunity to acquire cheaper purchased transportation.
