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How Does XPO Logistics Serve Its Customers?

By Motley Fool Staff - Updated Apr 10, 2019 at 6:33PM

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This logistics provider has positioned itself to play a significant role in less-than-truckload transportation.

XPO Logistics (XPO 0.46%) is one of the largest providers of trucking and logistics services in the world. In particular, the company has expanded its trucking strategy to provide less-than-truckload transportation services to its customers.

In the following segment from The Motley Fool's Industry Focus: Energy podcast, MFAM Funds' Bill Barker and host Nick Sciple give listeners an overview of the less-than trucking industry, how XPO's operations in that space have developed over time, and how those operations fit into the business's broader offerings.

A full transcript follows the video.

This video was recorded on Feb. 28, 2019.

Nick Sciple: One of the areas in which XPO specializes, and I wanted to call out, is this idea of less-than-truckload transportation. Can you discus for our listeners what the significance is of less-than-truckload transportation, how XPO is positioning themselves and offering those services, and what potential that has for some growth for the business over time?

Bill Barker: Let's use some round numbers. There's, call it $1 trillion of transport going on in the U.S. annually. About $700 billion of that is trucking. You've also got air cargo, shipping, rail, and a few other ways to move things. Trucking is about $700 billion. Of that $700 billion, about $600 billion is going to be full truckload. About $40 billion annually is going to be less than truckload. Less than truckload is just, it's a truck that's picking up a bunch of different cargoes along the way, and then bringing them to a distribution center, and maybe that cargo gets put on another truck. It's a logistics-intensive industry unlike truckload, which for the most part is, the truckload is a full truckload of one thing that's going in one place. That's the larger part of how things are moved.

But still, $40 billion annually is a good business to be in. And, it's a little bit more insulated from protection, in terms of, the logistics are just more complicated in moving something with a number of different customers to a number of different places.

A couple of years ago, XPO did something that it had said it wasn't going to do, which was to get into this asset-intensive trucking business. It bought Con-way. This was an operation which had substantial revenues and substantial EBITDA, but was not an especially well run operation. Then they acquired an European operation called Norbert Dentressangle. Between those, they wound up with a lot of both less-than trucking and trucking. What they did is they sold off the trucking, held on the less than truckload of Con-way. That offers them the opportunity to serve their customers with a lot of different operations.

The other things they do, intermodal is when a ship comes in and then you put it on rail. Drayage is just moving things around within a ship, off the shipping. They've got the less-than-truckload operation, and truck brokerage. They've got a lot of different ways that they can serve their customers.

Check out the latest earnings call transcript for XPO Logistics.

Bill Barker has no position in any of the stocks mentioned. Nick Sciple has no position in any of the stocks mentioned. The Motley Fool recommends XPO Logistics. The Motley Fool has a disclosure policy.

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