Dive Brief:
- XPO reported record results of annual group revenues of $15.3 billion, a 4.7% YoY increase over 2016's $14.6 billion, the Loadstar reported. Consolidated operating income rose 27.6% to $623 million, and operating margins increased to 4% from 2016's 3.3%.
- Free cash flow (FCF) is projected to reach $624 million in the current year, and generating more FCF will equip the company to seek out its next acquistion by the end of the year, according to CEO Bradley Jacobs.
- The company has yet to decide on a direction of acquisition, citing benefits to both startups with new technology and traditional businesses with established assets. According to Jacobs, XPO sees itself as a disruptor, rather than being among the disrupted.
Dive Insight:
XPO consistently budgets for acquisitions as its market share continues to grow.
Recent hurricanes Harvey and Irma hastened the effect of truck brokerage growth, leading 3PL XPO further along on its path to dominate the competition with FedEx and UPS. Having acquired approximately 17 companies since 2012, there's little reason to imagine management will constrain its current growth strategy.
In fact, such a swelling free cash flow could mean the company is prepared to make more than a single purchase, searching not only for new new technology via start-up targets, but also by pursuing more significant customer bases, as it did when Con-way came aboard in 2015.
Dominating during a downturn is just one strategy for cutting down competition within the industry, but with the news that Amazon will soon launch its own shipping service, XPO is already a lurking rival. Besides being a world-class 3PL, XPO is known for its affinity to snap up innovative companies and quickly turn around acquisitions into valuable company assets.
Acquiring the competition before Amazon joins the game could give XPO a leg up in the battle to be top logistics provider.
