Why XPO (XPO) Stock Is Nosediving

What Happened?

Shares of freight delivery company XPO (NYSE:XPO) fell 9.1% in the afternoon session after the company reported disappointing second-quarter financial results that revealed a significant drop in profitability. 

Although revenue held flat at $2.08 billion, investors focused on the sharp decline in net income, which fell to $106 million from $150 million a year earlier. Earnings per share also dropped significantly to $0.89 from $1.25. The company’s main North American Less-Than-Truckload (LTL) division experienced a 2.5% revenue decrease. More critically, tonnage per day in this segment plunged by 6.7%, and daily shipments fell 5.1%, signaling weakness in what the company's CEO called a soft freight environment.

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What Is The Market Telling Us

XPO’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 6 days ago when the stock gained 4.3% on the news that an analyst at Stifel raised the company's price target to $145 from $135. The analyst, J. Bruce Chan, maintained a 'Buy' rating on the stock, citing stable market trends and robust core pricing. While the note pointed out that demand remained unpredictable, the overall outlook was optimistic. The move was also supported by positive sentiment across the Less-Than-Truckload (LTL) sector, which refers to the transportation of relatively small freight. This sentiment was boosted after peer company Saia reported better-than-expected second-quarter results, suggesting healthier industry conditions than some investors had feared.

XPO is down 9.1% since the beginning of the year, and at $120.40 per share, it is trading 23.9% below its 52-week high of $158.20 from December 2024. Investors who bought $1,000 worth of XPO’s shares 5 years ago would now be looking at an investment worth $1,605.

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