XPO lowers 2019 earnings expectations

Stock in the roll-up trucking and third-party logistics provider has lost nearly half its value in the fourth quarter of 2018.    XPO Logistics on Tuesday lowered its profit projections for next year, further accelerating a recent sell-off of the company’s stock.
   The Greenwich, Conn.-based trucking and third-party logistics provider now expects growth of between 12 percent and 15 percent in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), down from a prior forecast of 15 percent to 18 percent, according to a filing with the U.S. Securities and Exchange Commission.
   Analysts have pointed out that 12 percent to 15 percent earnings growth is still nothing to sneeze at, but investors apparently are unconvinced.
   Stock in XPO dropped 9.6 percent to $60.28 per share on Wednesday, the day after the SEC filing, and was down another 17 percent to under $50 by midday Thursday.
   Jason Seidl, an analyst with Cowen & Co., told Bloomberg the drop share price was simply a result of a more “skittish” investment market.
   “Before, when the market was bullish, news like this wouldn’t affect it,” he said. “Now the market is skittish and news is affecting it.”
   It’s been a rough couple of months for XPO, with federal lawmakers earlier this month calling for an investigation into alleged “disturbing treatment” of employees at company-operated warehouses following reports from The New York Times and Los Angeles Times of pregnancy discrimination, sexual harassment and unsafe working conditions.
   Shares in the company have taken a serious beating in the fourth quarter of 2018, losing nearly half their value since closing at $114.47 on Sep. 28.
   Seemingly unrelated to the lowering of the company’s internal earnings expectations, investment firm Spruce Point Capital on Thursday released a scathing report in which it downgraded XPO’s stock rating to a “strong sell” and suggested a price target of $24 to $36. The report cited “a $4.7 billion debt overhang, flawed business model, questionable governance, dubious financial and accounting methods, increased regulatory scrutiny, and a loss of confidence in management” as the primary reasons for the downgrade.
   “XPO is dependent on external capital, asset sales, and factoring receivables to survive and is covering up a working capital crunch that can been seen by bank overdrafts,” said Spruce Point. “As credit conditions tighten, cost of capital increases, and XPO’s business practices come under greater scrutiny, its share price could swiftly collapse in Enron-style fashion. U.S. Senators are already investigating XPO’s labor and safety practices, but we believe they should also review our report.”