Stock in the truck brokerage firm
RXO
rose in response to its latest earnings report, marking the latest signal that investors believe things are getting better for the transport industry and maybe even the economy.
Wednesday morning, the company reported adjusted first-quarter earnings per share of 11 cents from sales of $1.1 billion. Wall Street was looking for 7 cents and $1.1 billion, respectively, although sales are down from $1.3 billion in the year-earlier quarter.
“RXO continued to deliver solid results in the first quarter, despite the current challenges in the freight market and the economy,” said CEO Drew Wilkerson in the company’s news release. “Our brokerage business gained market share and recorded a 6% in volume year-over-year. We also maintained best-in-class brokerage gross margin of 16.3 percent.”
RXO stock(ticker: RXO) was up 8.1% in midday trading, while the S&P 500 and
Dow Jones Industrial Average
had gained about 0.2% and 0.1%, respectively.
Freight rates have slipped as the economy has weakened, hitting demand for logistics services. That makes life difficult for businesses such as RXO that arrange shipping for customers and are paid a spread between what shippers pay and truckers get. The spread tends to be wider when demand for shipping is high and lower when there is excess trucking capacity.
Coming into Wednesday trading, shares were down about 27% from the high of $25.50 reached in October. The S&P 500 is up about 6% over the same span.
Some trucking stocks have risen even after earnings came in lower than expected, an indication that investors are willing to pay up now in anticipation of better times. On April 26,
C.H. Robinson Worldwide
(CHRW), another truck brokerage, reported year-over-year declines in first-quarter sales and earnings, but the shares rose 7.8% following the news. Wall Street was impressed with what C.H. Robinson is doing to control costs.
ArcBest
‘s (ARCB) earnings fell short of Wall Street’s projections due to weak spot prices in the freight market, but the stock rose 5% afterward.
To be sure, not every truck-related stock has risen regardless of downbeat results. Shares of
Old Dominion Freight Line
(ODFL),
Knight-Swift Transportation
(KNX), and
J.B. Hunt Transport Services
(JBHT) all fell after first-quarter numbers were released. All three companies missed Wall Street estimates and reported lower earnings than in the first quarter of 2022.
Still other companies are doing better than expected.
Saia
(SAIA), a trucking company that competes with the likes of
XPO
and Old Dominion, reported a year-over-year earnings decline in the first quarter, but results beat Street estimates. Shares rose almost 15% in response.
It’s a complicated time in trucking, to say nothing of the broader economic situation. Whether or not it is a good time to buy trucking stocks still remains to be seen.
Along with its earnings, RXO announced a $125 million share-repurchase program. That might have helped boost the stock as well.
Write to Al Root at [email protected]
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