The holiday season is typically a busy one for XPO Logistics (NYSE:XPO). With the rise of e-commerce, it's more important than ever to have efficient ways of getting goods where they need to go, and XPO has played a key role in helping to facilitate that movement. However, XPO has been dealing with some issues affecting one of its major customers, and that could have long-lasting negative impacts on its growth potential.

Coming into Thursday's fourth-quarter financial report, XPO investors were optimistic that the company would post much better numbers than it did during 2017's holiday quarter. XPO did indeed generate substantial growth, but the results weren't as encouraging as most had hoped, and ongoing troubles show no signs of letting up in the immediate future.

Semi-trailer truck with XPO logo on it on a highway

Image source: XPO Logistics.

XPO deals with disappointment

XPO Logistics' fourth-quarter results marked a discouraging end to the year. Sales climbed just 5% to $4.39 billion, which was far slower than the company had posted earlier in 2018, and weaker than the roughly 9% growth that those following the stock had expected. Adjusted net income jumped 66% to $98 million, but the resulting adjusted earnings of $0.72 per share fell well short of the consensus forecast among investors for $0.84 per share on the bottom line.

XPO's segments showed a mix of performance. The logistics segment saw strong sales growth, with overall revenue climbing 10% on organic growth of more than 12%. Rising demand for e-commerce logistics was a primary contributor to performance, as were the packaged goods and food and beverage sectors in North America and the fashion industry in Europe. Operating income was lower for the unit, but adjusted pre-tax earnings climbed 11% from year-earlier levels due to a large number of new contracts that began over the course of the past year.

However, the transportation segment didn't do as well. Revenue was up less than 2% year over year for the segment, with less-than-truckload shipments in North America and Europe leading the way higher. Adjusted pre-tax operating profit growth was similarly minimal, at about 3%, as XPO wasn't able to capitalize as much as investors wanted from improved expense management in keeping the company's operating ratio moving in a more favorable direction.

CEO Brad Jacobs explained the reason for the pressure on the company's most recent results. "We missed our fourth quarter forecast for adjusted EBITDA," Jacobs said, "primarily due to headwinds in France and the U.K. and a loss of profit in the postal injection business with our largest customer." The CEO was still pleased with XPO's full-year results.

Check out the latest XPO earnings call transcript.

Will XPO recover?

XPO doesn't see those headwinds letting up any time soon. In explaining anticipated growth in adjusted pre-tax operating earnings of 6% to 10%, Jacobs said XPO "anticipates the impact of our largest customer substantially downsizing its business portfolio with us starting in the first quarter, as well as our more cautious view of Europe." XPO remains confident about its long-term prospects, but higher interest expense from its stock buyback program could also weigh on free cash flow.

The impact of the customer issue on XPO's guidance for 2019 was substantial. The company sees revenue growing just 3% to 5% for the full year, with organic growth of 4% to 6% getting weighed down slightly by currency impacts and other factors. Similarly, adjusted pre-tax operating earnings should come in between $1.65 billion and $1.725 billion, and while that would represent growth of 6% to 10% from 2018 levels, that's less than the 12% to 15% XPO had previously forecast. Free cash flow could be as much as $125 million less than previously expected, with a new range of $525 million to $625 million.

XPO investors weren't pleased with the news, and the stock plunged 15% in pre-market trading Friday following the Thursday evening announcement. Until investors have more clarity on how the logistics specialist expects to rebound from its troubles, XPO will have trouble mounting a rebound.