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Why Shares of XPO Logistics Are Up Today

By Lou Whiteman - Updated Mar 10, 2020 at 1:40PM

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The shipping specialist is expanding its presence in the United Kingdom.

What happened

Shares of XPO Logistics (XPO 7.31%) were up about 7% around 1:30 p.m. Tuesday, after the shipping and transport specialist announced plans to buy a logistics operation in the United Kingdom. The company's dealmaking efforts are under scrutiny right now, and investors appear to be pleased to see XPO looking to expand in a key area.

So what

Swiss transport company Kuehne & Nagel International on Tuesday morning agreed to sell its U.K. contract logistics operations, which is focused on beverage, food service, tech, and e-commerce, to XPO for an undisclosed price. The unit to be sold generated about GBP 500 million ($645 million) in revenue in 2019, operating out of about 75 facilities.

Packages on a conveyor belt at a sorting facility

An XPO sorting facility. Image source: XPO Logistics.

XPO grew from a second-tier logistics company to one of the top names in global shipping in part due to these sorts of bolt-on deals, but the company of late has been more in the news for what it might sell. The company in January said it was exploring the sale of one or more of its businesses, complaining the market wasn't fully valuing the sum of its many parts.

The Kuehne & Nagel unit will be folded into XPO's European logistics business, one of the units that is on the block.

Now what

XPO shares have been beaten down in recent weeks as part of a broader market sell-off, and industry-specific fears that the COVID-19 coronavirus would depress economic activity and lead to a slowdown in global cargo volumes. XPO appeared oversold, giving back all of the gains since its potential breakup announcement, and was due for an upswing even without a deal.

The announcement also likely helped reassure investors that it is business as usual at XPO despite the coronavirus threat. It is too soon to say how much the economy will slow, or whether a slowing economy will impact XPO's divestiture effort. But the deal, if nothing else, provides some reassurance that XPO execs aren't seeing any reason to hunker down.

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XPO Logistics, Inc. Stock Quote
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