XPO Logistics Inc (NYSE:XPO) certainly isn’t a household name. But since it went public in 2012, XPO stock is up more than 800%. That’s a pretty good run for a company you’ve never heard of.
Just so you know, XPO is the second largest freight brokerage and logistics services company in the world. It has the largest trucking fleet and e-fulfillment services in Europe.
In North America, it’s the largest manager of expedited shipments and last-mile logistics for heavy goods. And it’s the third largest intermodal (combining various modes of transport, like rail, truck, air) shipper in North America.
It works with 67 of the Fortune 100 companies. And if you wanted some cocktail party trivia, XPO has handled all the logistics for the Tour de France bicycle race for the past 37 years.
Why XPO Should Be in Your Top 5
This should be a good start on answering the initial question in the headline. When companies are this big, working with most of the headline grabbing companies in the world, and you don’t know who they are, it’s time to find out because they are offering something very important and very special.
XPO only came into being — in its current form — around 2011 and didn’t get its national debut until 2012. But since then, it has acquired 17 companies to get to where it is today.
There’s no doubt that there are high barriers to entry in this sector and it’s obvious XPO has leaped over those barriers to get to the position it’s in now.
Given XPO’s exposure across the entire economy, it is realizing growth at every turn. E-commerce is the most obvious of these trends. As retailers now compete on getting orders in consumers’ hands as quickly as possible, logistics firms like XPO that were once picking up spillover work and now significant players.
But the other sectors that are less obvious are also crucial growth factors for XPO. For example, the energy sector is booming once again. Moving cargo to and from the Middle East, the US and Europe is a bigger business than ever, as oil prices top $70 a barrel. And as the global economy expands, so does demand for natural gas liquids (NGLs), which make plastics, paints and other solvents.
What’s more, logistics operations for handling this kind of cargo takes a special expertise comes at a higher premium than shipping bath soaps across the country. That’s more business and bigger margins.
Speaking of margins, XPO is also a key logistics firm for the defense sector. Now that the Trump administration has rolled back the sequestration on defense spending, this sector is seeing a boom it hasn’t seen during peacetime for a very long time.
The Bottom Line for XPO
Again, this isn’t low-margin, volume-based work. This is specialized work that comes with higher margins and lower competition.
XPO’s recent Q1 earnings bear out these facts. Net income for the quarter was up a whopping 325% from the same quarter a year ago. Earnings were up 29%. Revenue was up 18% for the quarter, with the Logistics division up 23%.
And to top all that off, XPO also announced the biggest deal in its existence this quarter with a Fortune 50 company that has yet to be named.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.