XPO Earnings: Retail Destocking and Sluggish Industrial Sector Pressuring LTL Tonnage and Margins

XPO’s first-quarter organic top line increased about 1% year over year, excluding the November truck brokerage segment (RXO) divestiture. Revenue came in slightly ahead of our forecast as LTL yields are holding up better than we anticipated thus far this year. Relative to first-quarter 2022, LTL tonnage fell 2%, while total yield was up about 2.5%. In short, retail-sector restocking has retrenched on elevated inventories and industrial end markets are softening, pressuring volumes across the LTL industry following an exceptionally robust growth phase. That said, the current trucking backdrop is not unexpected, and we've already been baking in a pullback in 2023. European trucking segment revenue grew 6% (removing foreign exchange), likely due to new contract wins and lingering pricing strength, though we expect pricing gains to diminish as the year progresses.