Getting things where they need to go is one of the foundations of commerce, and XPO Logistics (XPO -0.16%) has worked hard to become a leader in handling the details of moving goods from place to place. Yet with the rapid evolution of transportation needs that have come with dramatic growth in e-commerce, XPO has run into obstacles in making the most of the opportunities ahead of it. In particular, key customer defections have weighed on XPO's results, and that's left the logistics giant scrambling to find ways to replace demand for unused capacity.

Coming into Wednesday's first-quarter financial report, XPO investors were ready to deal with falling earnings, but they still wanted to see encouraging sales numbers. XPO wasn't able to make good on that glass-half-full promise, and shareholders will have to assess whether the company's promise of a better future is likely to become reality.

White truck with XPO branding on the side in the right lane of a four-lane highway.

Image source: XPO Logistics.

Surprising drops for XPO

XPO Logistics' first-quarter results didn't get 2019 off to a strong start. Revenue came in at $4.12 billion, down almost 2% from year-earlier levels and falling well short of the better than 1% gain that most of those following the stock had hoped to see. Adjusted net income also dropped, falling 27%, to $59 million. Just about the only good piece of news was the fact that adjusted earnings of $0.51 per share topped the consensus forecast among investors for just $0.39 per share.

XPO saw similar disparities between its two primary segments that it's seen in recent quarters. On the logistics side of the business, segment revenue was actually higher by 3.2%, with organic growth of greater than 8%. The company cited e-commerce, food and beverage, consumer packaged goods, and aerospace as drivers of solid performance for the segment. Adjusted pre-tax operating earnings for the division were up about 1%, with higher depreciation expenses from capital expenditures being the primary drag on GAAP operating income.

Yet transportation was a negative for XPO. Revenue for the much larger segment was down about 4%, with the company blaming the loss of freight brokerage and last-mile direct postal injection revenue from its largest customer for much of the shortfall. Growth in less-than-truckload shipments in North America helped offset some of the losses elsewhere, though, as did solid European transport numbers. Adjusted pre-tax operating earnings eased lower by just 1%, with foreign-currency impacts hurting what otherwise was a strong quarter operationally.

CEO Brad Jacobs maintained a positive view on the overall situation, highlighting not only the financial performance above but also the promise of more business to come. "We also closed a record $1.1 billion of new business," Jacobs said, "up 15% year over year, [and] our sales pipeline stands at more than $4 billion of active bids -- a new high-water mark for us."

What's next for XPO?

In particular, XPO is working in both of its main segments to foster growth. In logistics, labor-productivity tools are helping to boost gross margin while using innovative new digital platforms to provide better customer services and make its clients more productive. Meanwhile, in the transportation segment, technology initiatives are improving on-time delivery performance and boosting customer satisfaction. The company hopes to use artificial intelligence to be smarter about route optimization and loading, as well.

XPO didn't make big changes to its full-year guidance. The company still sees 2019 sales coming in up 3% to 5%, although it boosted its organic growth expectations by 1.5 percentage points to a new range of 5.5% to 7.5% based on excluding direct postal injection revenue from its calculations. Adjusted pre-tax operating earnings should come in between $1.65 billion and $1.725 billion, up 6% to 10% from last year.

However, XPO did make big moves with its stock-repurchase program. The company bought back 35.2 million shares between mid-December and the end of April at an average price of just under $53.50 per share, spending about $1.9 billion in the process out of an authorized $2.5 billion.

XPO investors took the mixed news in stride, and the stock moved lower by just a fraction of a percent in after-hours trading following the announcement. It'll take more work for XPO to recover, but at least the company seems to have a viable pathway to mount a rebound in the months to come.