The road ahead for XPO is an excursion the trucking company is only beginning to travel.
On the first day of November 2022, XPO completed its spinoff of RXO, creating two independent, publicly traded firms. XPO is a provider of less-than-truckload transportationi.e., shipping freight for customers that dont have enough volume to fill a whole truck. RXO, meanwhile, is the fourth largest U.S. truckload broker.
Exactly one week later, Carl Anderson joined XPO as chief financial officer.
What gets me excited and gets me going is being a part of a company where there is a lot of opportunity to take it to a whole different level, Anderson tells Fortune. He sees only opportunity ahead, saying there has been a valuation gap between XPO and its peers. As CFO, he is working to improve profitability and better position the company in the eyes of the market.
Courtesy of XPO Logistics
Anderson credits his decades-long interest in finance to two events. The stock market crash of 1987 and a money and banking class he took while enrolled at Michigan State University. His career has united his love of capital markets with the transportation industry. Living in the Detroit area, you naturally gravitate to the auto industry, says Anderson.
After earning his bachelors degree in economics, he served as a senior financial analyst with First Chicago Corp. He spent a decade with General Motors Acceptance Corp., the capital finance arm of the auto giant. At the time, it had been struggling with financing issues and lost its investment grade rating. Anderson helped solve those issues and later joined Meritor, where he worked for over 16 years in several senior leadership positions, including chief financial officer. Last year, he steered the $3.7 billion sale of Meritora supplier of axles, brakes, and more for commercial vehicle manufacturers and defense contractorsto Cummins.
Anderson says transportation is alluring because of how important it is to the economy. And because 70% of freight is moved by trucks, he sees great allure in that subsegment of the industry. First on the supplier side with Meritor, and now in trucking with XPO.
XPO is newly lean, after many years of an acquisition streak that included multibillion-dollar deals for Con-way and Norbert Dentressangle. But post spinoff, Anderson says XPO will have the opportunity to be more nimble and agile, with a narrower focus on strategic decisions.
There was always a little bit of a conglomerate discount with the valuation of the company, says Anderson. A spinoff will allow each of the individual companies to be evaluated for valuation purposes on its own, relative to their specific peer group.
Earlier this year, Anderson steered XPO through his first earnings report since joining the company. Revenue for the quarter grew to $1.83 billion versus $1.77 billion the prior year, boosted by a 1.4% increase in yield for the North American less-than-truckload unit, with tonnage up by 0.9%. Anderson says the results are strong when compared with the negative trends in the industry. XPO, he says, is investing in capacity ahead of when demand picks up, allowing it to be better positioned to grab profitable market share.
When asked about how he looks at the route XPO must navigate in the future, Anderson points to long-term 2027 targets the company first unveiled in October, including a revenue compound annual growth rate of 6% to 8% and an adjusted operating ratio improvement of at least 600 basis points. Both targets cover the period from 2021 through 2027.
Were not reliant necessarily on a lot of outside factors, says Anderson. We are reliant on ourselves, which is even more exciting, because if we can executewhich I know we willwe have a pretty bright future ahead of us.
Wall Street may need a little more convincing. The companys stock dropped 14% on the day of the latest earnings report, and analysts at Wells Fargo and Jefferies were among those to cut their ratings on the stock. Wells Fargo says it is likely a transition year for XPO.
XPO made a case for optimism when addressing industry analysts. In North America, we drove above-industry tonnage growth in [less-than-truckload] in Q4, and we ended the year with over $1 billion of adjusted Ebitda, making good on the targets we set five years earlier, said CEO Mario Harik during a conference call. We saw a strong demand from our customers, especially a lot of the new customers we onboarded through the course of 2022.
Courtesy of XPO Logistics
As Anderson settled into his new CFO role at XPO, his approach has been to spend a lot of time with his team and set clear objectives. He aims to stretch the team a bit further in terms of the targets they work toward, which are also aligned with what XPO is trying to achieve. Anderson says that each team, and even each individual on the team, should have goals that fit into where the company is going.
He also touts employee empowerment, encouraging team members to make decisions. If people can see, day in and day out, that whatever they are doing is having an impact on the company, it creates energy and a lot of enthusiasm, says Anderson.
And as for what he drives toward personally? Being able to partner with the business, to be able to grow the company very, very profitably, and provide a strategic direction to the company, which is beneficial not only to shareholders, but beneficial to all the employees, says Anderson.
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