Shares of XPO Logistics (NYSE:XPO) were trading 13.8% lower as of 2:53 p.m. EDT Monday and are now down 44% in the past month. Before markets opened Monday morning, there were fresh warning signs the U.S. economy could be spiraling into a recession, and that has investors fleeing transport and shipping stocks.
XPO runs a global logistics and shipping operation and has been hit hard by the spread of the COVID-19 outbreak and its affects on global economic activity. While a near-term impact on results seems certain, there was at least some reason to hope that if the outbreak can be quickly contained, or if the government acts swiftly on stimulus, a full-fledged U.S. recession could be avoided.
There have been developments in the last few days to suggest the U.S. economy is on life support. On Sunday night, the Federal Reserve slashed the benchmark federal funds rate by 100 basis points to zero, a sure sign that the Fed's internal data shows reason for worry.
One data point released early Monday explains what the Fed is worried about. The New York Fed's Empire State business conditions index fell a record 34.4 points in March to negative 21.5, well below economist expectations for a reading of 4.8. The reading is the lowest level since 2009.
XPO is under particular scrutiny as it explores the sale of one or more of its business units, a move the company announced in January. Investors could be worried that it will be harder to complete those auctions in a volatile environment or if potential buyers believe the economy is headed for a recession.
With the fall XPO is now pushing up against a 52-week low, at levels last experienced when the company was under attack from a short-seller and dealing with the unexpected loss of a major customer. XPO's business has come a long way since then, but investors, as of today's trading, have little to show for it.
This remains a strong operator with the wherewithal to survive a downturn, and the shares look oversold. It's hard to predict how current events will impact the auctions, but if XPO can't find buyers willing to pay the valuations they think the businesses deserve, I'm willing to hold the company through a recession and see what opportunities it finds on the other side.