Why XPO Logistics (XPO) Stock Is Up Today

NEW YORK (TheStreet) -- XPO Logistics (XPO) was gaining 11.5% to $37.97 Friday after announcing a $700 million investment to fund acquisitions.

The air delivery and freight services company announced it secured a $700 million investment from the Ontario Teachers' Pension Plan, PSP Investments, and Singapore's sovereign wealth fund, GIC. Under the investment agreement XPO Logistics will sell newly issued common stock and preferred stock to the funds. The sale gives the three funds a combined stake in the company of about 21%.

The investment is scheduled to close on Sept. 17. XPO Logistics will use the proceeds from the investment to fund unspecified acquisitions.

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TheStreet Ratings team rates XPO LOGISTICS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate XPO LOGISTICS INC (XPO) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • XPO's very impressive revenue growth greatly exceeded the industry average of 4.7%. Since the same quarter one year prior, revenues leaped by 323.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • XPO's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, XPO has a quick ratio of 1.66, which demonstrates the ability of the company to cover short-term liquidity needs.
  • XPO LOGISTICS INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, XPO LOGISTICS INC reported poor results of -$2.50 versus -$1.49 in the prior year. This year, the market expects an improvement in earnings (-$0.74 versus -$2.50).
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Air Freight & Logistics industry and the overall market, XPO LOGISTICS INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for XPO LOGISTICS INC is rather low; currently it is at 16.41%. Regardless of XPO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -2.36% trails the industry average.
  • You can view the full analysis from the report here: XPO Ratings Report

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