What happened
XPO (XPO 1.52%) just poached a key executive from one of its rivals. Investors in the trucking company are hitting the gas on the stock in response, with shares up 16.3% as of 11:58 a.m. ET.
So what
XPO is a one-time transportation and logistics conglomerate that, after a number of spinoffs, is now primarily a provider of less-than-truckload (LTL) trucking services. LTL is the business of coordinating smaller shipments from multiple customers in a single truck.
LTL is lucrative if done right, but it can be complex and hard to do correctly. Historically, one of the best operators in the industry has been Old Dominion Freight Line (ODFL 1.19%).
On Thursday, XPO named Dave Bates its new chief operating officer. Bates joins the company after 27 years at Old Dominion, including serving as senior vice president of operations for the last 12. In that role, Bates was responsible for all day-to-day North American operations.
The move comes a month after XPO installed Wes Frye, who was Old Dominion's chief financial officer for 18 years, on its board.
Now what
It is impossible to overstate how highly regarded Old Dominion is among investors, and for good reason. The company has delivered consistent strong performance for decades in a cyclical industry known for booms and busts. XPO is clearly hoping to infuse its organization with some of that expertise.
"Dave is a high-impact executive with a strong track record of driving excellence in all aspects of LTL operations," XPO CEO Mario Harik said in a statement. "We're delighted that he'll be leading our operations in creating ongoing value for our customers and investors."
XPO still needs to execute, but the potential is clear. Today, XPO trades for about 7 times earnings, a significant discount to Old Dominion's earnings multiple of 28. Old Dominion trades at about 6 times sales, while XPO trades at 0.5 times sales.
It will be no easy task to build XPO into what Old Dominion has become, and it will take time. But investors are clearly intrigued by the moves the LTL specialist is making.