First look: Wall Street wallops RXO after earnings release

Adjusted net income for the company as a whole, a non-GAAP measure, was down year-on-year, declining to $2 million from $7 million last year.  According to Seeking Alpha, the third quarter non-GAAP EPS of 1 cent per share–down from 5 cents a year ago–was off Wall Street estimates by 3 cents per share. Total revenue of $1.4 billion was off consensus estimates by $30 million, SeekingAlpha said.

Adjusted EBITDA also was down slightly, to $32 million from $33 million a year ago. The adjusted EBITDA margin of 2.3% was a decline from 3.2% a year ago.

The net loss per share on a GAAP basis was 8 cents. For the first three quarters, those losses are now at 32 cents per share.

With another quarter in the books with negative net income, RXO’s chairman and CEO Drew Wilkerson’s prepared statement released in conjunction with its third quarter earnings looked to the future. 

““RXO is well positioned because of our scale as the third-largest brokered transportation provider in North America and the strategic decisions we’ve made this year,” he said. “Our best-in-class technology is enabling us to realize the benefits of our larger scale, and our new cost initiatives are expected to yield more than $30 million of savings. We have an exceptional track record of profitable growth across market cycles, and our asset-light business model is poised to generate strong cash flow over the long term.”

But there are no comparisons at RXO that would look good relative to its publicly-traded 3PL peer C.H. Robinson (NASDAQ; CHRW). That company has been touting its technology, particularly its use of AI, and it has the numbers to back it up. All of its key third quarter metrics were up compared to a year ago, and its stock price will open trading Thursday up more than 45% in the last year and more than 31% in the last three months. By contrast, RXO is down about 37.5% in the last year, but is up about 13.8% in the last three months. But those figures are before the Thursday selloff. 

RXO had significantly higher revenue in the third quarter compared to the prior year and sequentially, fueled in part by the acquisition of Coyote Logistics, completed in the third quarter of last year. 

Truck brokerage revenue climbed to just over $1 billion from $655 million a year ago, 

Discussing third quarter market conditions, Wilkerson said “Truckload capacity exits accelerated, which impacted both our buy rates and Brokerage gross margin.” 

But it came against a backdrop of weaker demand, he added. “Both of these dynamics have continued into the fourth quarter,” Wilkerson said. That sort of combination is deadly in brokerage: rising costs to acquire capacity but softer demand as well

RXO’s earnings call with analysts was scheduled for 8 a.m. Thursday.

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