Stock Entry Point Article​

Looking to buy transportation stocks? Check out XPO Logistics

The news lately has shifted from the number of coronavirus deaths to the progress made by vaccinations. A lot of countries around the world are starting to open up their economies again. If you feel optimistic about the coming future and are convinced about an impending economic recovery, then one sector to bet on is logistics and transportation.

XPO is among the best transportation stocks

Within the transportation sector, XPO Logistics is one of the top ten logistics and transportation companies globally. It is almost a mini-conglomerate offering freight brokerage, less-than-truck-load, and freight forwarding services. The company did $16.6 billion in revenues in 2019. Its stock has also been on a roll, gaining more than 100% since the March market crash. Only FedEx has performed better with a 169% gain during a comparable period. The Hub Group, a peer of XPO, is up 33% since March.

XPO has managed to build a resilient business model by leveraging scale. The company has 50,000 customers across 30 countries that helps bring down the revenue and earnings volatility. XPO is also an asset-light business, having spent only 2.1% of revenues on capex in 2019. There are many factors that position XPO Logistics as one of the best transportation stocks 2020.

The most recent quarter performance

XPO reported its Q22020 earnings on 31st July 2020. While revenues were down 17% year-on-year to $3.5 billion, the EBITDA fell 62% year-on-year to $172 million. Net income was negative at -$0.63 per share. So, XPO’s stock might have slipped disproportionately due to the negative earnings results. However, that presents a buying opportunity for investors looking for the top transportation stocks. Those who believe in an eventual economic rebound can take the advantage of any bearish sentiment at the moment to initiate a position in XPO. Besides, XPO has been able to generate positive cash flows during the pandemic, a testament to its managerial agility.


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