RXO’s debt rating at S&P holds; so does its negative outlook

The action also solidifies the dichotomy between the ratings of S&P Global and Moody’s on the 3PL. RXO’s (NYSE: RXO) rating at the latter agency is Ba1, which is considered one notch more than the BB rating at S&P Global (NYSE: SPGI) that now has been affirmed. 

The Moody’s grade is one notch less than the cutoff between investment-grade and non-investment grade debt, putting S&P’s rating two notches below that line. 

S&P’s BB rating was also affirmed at RXO for its unsecured notes.

Outlook stays the same

The improved market was not enough even to lift RXO off its negative outlook. That status means a downgrade is possible but not guaranteed given the financial and market conditions. There is no limit to how long a company stays on a negative (or positive) outlook.

The negative outlook for the company, S&P Global said, “reflects the risk that the company will be unable to increase its relative profitability or improve its credit measures to the levels we believe are necessary to stabilize the rating.”

But S&P Global is not completely dismissing the current market. RXO’s credit metrics, the agency said, will improve in the next two years “led by higher spot market prices that we expect will support increased earnings amid early signs of improvement in freight market conditions.”

“However, the company’s margins have lagged those of its rated logistics provider peers, which has prompted us to downwardly revise our assessment of its business risk profile (BRP),” S&P added.

In a cautious embrace of the rise in freight rates, the agency said “market conditions have demonstrated early signs of improvement.”

But it is not enough, S&P indicated, for an upgrade at RXO. “We now place greater emphasis on the company’s ability to achieve higher margins based on our evolving view of its business risk,” the agency said.

RXO is a publicly-traded company. Ratings reports of an agency like S&P Global or Moody’s (NYSE: MCO) generally reveal little new about its  finances. But their views can be more pointed than equity analysts. 

Surging stock price

RXO’s stock price has been on a roll, up 77% in the last year and about 42% in the last month. According to Barchart, there are 4 strong buys on RXO stock from equity analysts, 14 holds and two strong sell recommendations.  

S&P Global noted that adjusted EBITDA at RXO had fallen to $177 million in 2025 from a peak of $366 million in 2022, when it was spun off from XPO, “even as it nearly doubled the revenue from its brokerage segment following its late-2024 acquisition of Coyote Logistics.”

“While we previously viewed the company as an industry leader in terms of its margin profile, its performance over the past three years has caused its margins to decline to levels consistent with or below those of its broader rated peer group,” S&P Global said, citing Echo Global Logistics as an example. 

Echo currently holds a rating of B- at S&P Global. That is four notches less than RXO’s BB.

Given that reduced view of RXO’s position, S&P said “we no longer consider RXO’s operating performance track record as supportive of a higher BRP assessment.”

An improvement in the company’s performance owing to a stronger freight market isn’t enough, to shed the negative outlook, S&P Global said, “The negative outlook reflects the risk that the company will be unable to increase  its relative profitability or improve its credit measures to the levels we believe are necessary to stabilize the rating,” it said.

Higher freight rates are not enough for S&P Global. RXO, it says, needs to show “relative margin outperformance.”

How is it doing in comparison?

“While we expect a sector-wide recovery to bolster the earnings and metrics of participants across the broader freight brokering landscape, our rating remains predicated on RXO demonstrating greater and sustained relative strength in its earnings trajectory relative to its immediate peer group,” S&P Global said. “If we no longer believe the company can differentiate itself from its peer group, we would likely lower our rating by removing the positive comparable rating adjustment.”

The squeeze on brokers over the past few years was recapped by S&P Global: minimal spot market activity and reduced demand leading to an inability “to fully pass through increases in procurement costs to its clients due to existing contractual obligations led to a significant contraction in its margin and heightened earnings sensitivity.”

But even as the ratings and negative outlook held firm, and S&P Global’s view of RXO’s BRP is weaker, the ratings agency did have praise for the company’s position. “We believe RXO is well positioned to leverage its significant scale as a leading brokerage and harness its extensive proprietary data to unlock procurement efficiencies as market conditions evolve,” S&P said. Furthermore, we expect its established relationships with large enterprise customers will serve as a key factor in securing high-quality business.”

In another conservative declaration, S&P Global said “freight brokers are poised to benefit from excess trucking capacity exiting the industry, though it’s still early.” The ratings agency said it is “cautiously optimistic that the recent rebound represents the beginning of a gradual (and sustainable) improvement in truck pricing.”

While the widening of the net that could catch up brokers in liability actions as a result of Montgomery vs. Caribe Transport II has been seen as beneficial for larger players, S&P Global again was cautious, owing to other factors.

“This will likely be more impactful for smaller brokers with larger brokers positioned to potentially take market share,” S&P Global said. “Offsetting these positives, protracted macroeconomic uncertainty and higher oil prices may begin to weigh on freight demand.”

A request for comment from RXO had not been responded to by publication time.

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