What happened

XPO Logistics (XPO 2.82%) released its first quarterly earnings report late yesterday since spinning out GXO Logistics (GXO -0.47%) as an independent company, and investors were not impressed. Shares of XPO fell as much as 11% on Wednesday morning before recovering some of those losses as the day went on.

So what

It's a period of transition for XPO, which in early August spun GXO off to shareholders to become more of a pure-play trucking transportation company. Late Tuesday, XPO provided the first glimpse of how the slimmed-down company is performing.

An XPO Logistics truck drives in an urban environment.

Image source: XPO Logistics.

Adjusted third-quarter earnings were $0.94 per share, a penny above expectations, on revenue that at $3.27 billion was nearly $200 million ahead of the forecast. It was the highest quarterly revenue number in company history, and XPO also tightened full-year earnings guidance to $4.15 to $4.25 per share, compared to previous guidance for $4 to $4.30.

But analysts had believed XPO was sandbagging expectations, with the Street forecasting $4.43 per share in 2021 earnings. XPO also warned of issues in its less-than-truckload, or LTL, segment, which saw costs rise during the quarter. CEO Brad Jacobs issued a statement saying that the company's operating ratio, a measure of cost, "was negatively impacted by our decision to continue insourcing purchased transportation in the midst of driver and equipment constraints."

In a world where equipment and labor are in tight supply, XPO got tripped up. To some extent, the entire industry is under pressure, but considering that rivals including Old Dominion Freight Line (ODFL 0.87%) still managed to report impressive quarterly results, the market was not in a forgiving mood.

Now what

XPO is taking steps to cut costs and make its network more efficient, including expanding warehouse and trailer capacity and boosting driver recruitment and training. The company is also pulling the annual repricing that usually occurs early into the year into November, boosting revenue in a tight market. But that will take time, and XPO is seemingly tempering expectations for LTL in the quarters to come.

Other business segments, including XPO's freight brokerage, looked strong, and the company followed through in the quarter on its pledge to de-leverage its balance sheet after the GXO spinoff by paying down $1.5 billion in debt.

There is still a growth story to be told at XPO, and the company will likely have a lot of opportunities to buy assets and to further streamline in the quarters to come. But for now, there is an issue to be worked out in LTL. Given the company's track record, I believe it will get it right over time, but investors on Wednesday were in no mood to hang around to find out.