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XPO shrinks share count further as it buys back another 17 million shares

About $900 million spent on latest share shave, Deutsche Bank report says (Source: Jim Allen/FreightWaves)

Transport and logistics provider XPO Logistics, Inc., (NYSE:XPO), apparently making good on commitments to buy back significant blocks of common stock at depressed prices, has in the past 60 days reduced its outstanding shares by 17 million or 15 percent – coming on the heels of an initial 17 million share buyback in early February, according to an analysis published Monday by investment firm Deutsche Bank.

The twin buybacks drop XPO’s common shares outstanding to around 92.2 million from 127 million at the start of 2019, Deutsche Bank said. The first series of buybacks, executed around February 4, dropped the outstanding share count to 109 million. At that time, the company said its board had authorized funds for a second series, but that the company hadn’t implemented the round as of then.

According to Deutsche Bank, XPO executed the latest round of repurchases about 60 days from the completion of the first cycle. In the past two months, it has deployed more than $900 million to further decrease its share count, Deutsche Bank said. It based part of its analysis on an XPO filing with the Securities and Exchange Commission made today.

In December 2018, XPO Chairman and CEO Brad Jacobs said the company would forego acquisitions in favor of share buybacks that, with XPO’s shares more than 50 percent off their all-time highs at the time, represented a more cost-effective use of its capital. All told, $2.5 billion had been authorized for the buybacks.

XPO common shares, which traded as high as $116 per share in the fall of 2018, had fallen into the $50s amid a short-seller’s report in mid-December that was very critical of the company’s accounting practices, followed by disclosures in February that it would miss fourth quarter expectations after a major customer believed to be Amazon.com, Inc. (NASDAQ:AMZN) would pull $600 million in business from XPO, or two-thirds of Amazon’s annual business with the company. The latter disclosure forced XPO to lower its 2019 outlook.

Amit Mehrotra, the Deutsche Bank analyst who prepared Monday’s report, said it would be difficult to “find any instance where management has been so aggressive in seemingly capturing short-term dislocations in stock price for the benefit of long-term shareholders. XPO shareholders should also be heartened that Jacobs owns 20 million XPO shares. One long-term caveat, said Methrotra, is that all of the repurchases were made with debt.

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Mark Solomon

Formerly the Executive Editor at DC Velocity, Mark Solomon joined FreightWaves as Managing Editor of Freight Markets. Solomon began his journalistic career in 1982 at Traffic World magazine, ran his own public relations firm (Media Based Solutions) from 1994 to 2008, and has been at DC Velocity since then. Over the course of his career, Solomon has covered nearly the whole gamut of the transportation and logistics industry, including trucking, railroads, maritime, 3PLs, and regulatory issues. Solomon witnessed and narrated the rise of Amazon and XPO Logistics and the shift of the U.S. Postal Service from a mail-focused service to parcel, as well as the exponential, e-commerce-driven growth of warehouse square footage and omnichannel fulfillment.

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