XPO thrives in Q2 as it eyes more M&A targets

Bradley Jacobs, chairman and chief executive officer of XPO Logistics, said bigger merger and acquisition deals likely will not occur soon, but the company is currently in discussions regarding smaller purchases that could take place at any time.    Booming third-party logistics provider XPO Logistics recorded strong second quarter 2017 earnings results as it remains on the prowl for further merger and acquisition (M&A) targets.
   Bigger deals that are in the billions of dollars will not be finalized soon, but XPO is in discussions regarding smaller deals, which could occur at any time, Bradley Jacobs, chairman and chief executive officer of XPO said.
   Jacobs said the company would spend up to $8 billion on M&A, but pointed out that this was a maximum, not the actual planned spend.
   XPO officials said the company would be willing to buy firms that are doing well in addition to fixer-uppers, but if the company to be acquired does need rehabilitation, a very clear plan has to be in place. XPO’s two preconditions for any transaction are that the deal has to be compelling to both shareholders and its customers.
   In addition, XPO plans to nearly double its number of hubs in its last-mile delivery network across the United States within the next year and a half. XPO currently has 45 hubs and plans to have 55 hubs by the end of 2017 and 85 by the end of 2018.
   During the second quarter, XPO’s net income attributable to shareholders totaled $47.6 million, up 11.7 percent from the second quarter of 2016, while net revenues rose 2.1 percent to $3.76 billion.
   “The investments we’re making in sales and technology have already yielded a record $1.43 billion of new business through June, which is 62 percent higher than last year,” Jacobs said. “Our global pipeline stands at over $3.3 billion, our cost initiatives have substantial runway, and the operating environment is favorable.”
   Jacobs said XPO’s most notable growth came in its last-mile and contract logistics business lines, which he said are two of the fastest-growing parts of the supply chain where XPO holds leading positions in e-commerce.
   He attributed XPO’s strong results primarily to three factors: the company’s leadership positions in some of the fastest growing parts of transportation and logistics, e-commerce strength, and cost cutting initiatives.
   XPO generated $216 million of cash flow from operations and $98.1 million of free cash flow during the quarter.
   Looking ahead, XPO said it expects to grow free cash flow of existing businesses by over 2.5 times in the medium term through EBITDA growth; lower interest expense; and lower transaction, integration and rebranding costs.
   Jacobs said XPO will continue to significantly invest in its technology and sales organization.
   Based out of Greenwich, Conn., XPO has operations in 31 countries with over 90,000 employees across the globe.