On Monday, Gimme Credit, a corporate bond research firm, upgraded its rating on XPO, Inc (NYSE:XPO) to "improving" from "stable." The upgrade reflects the firm's positive outlook on the company's financial leverage prospects. According to Gimme Credit, XPO's net leverage is expected to decrease in the near to medium term, aligning with the company's target to reduce net leverage to between one and two times.
XPO Logistics (NYSE:XPO) has credited its recent performance to the execution of its LTL 2.0 strategy, which was introduced in 2021. This strategy aims to achieve targeted growth in North American less-than-truckload (LTL) operations, with revenue growth projected at 6-8%, adjusted EBITDA growth at 11-13%, and a minimum 600 basis point improvement in the adjusted operating ratio.
Gimme Credit's decision to upgrade the credit score of XPO to 1 from 0 comes as the company continues to work towards its long-term goal of becoming a pure-play North America LTL carrier. XPO's ambition also includes attaining an investment-grade credit profile. The potential divestiture of its European business is expected to contribute to these objectives, with the company anticipating improved market conditions and valuations in Europe over the next few years.
InvestingPro Insights
XPO Inc's (NYSE:XPO) strategic focus on its LTL 2.0 strategy appears to be well-received by analysts, as evidenced by the recent upgrade from Gimme Credit. The company's financial leverage prospects are further supported by real-time data from InvestingPro. XPO's market capitalization stands at approximately $13.62 billion, reflecting a solid position in the industry. Moreover, the company has shown a strong price performance, with a one-year total return of an impressive 243.1%. This performance is a testament to the positive sentiment surrounding the company's future profitability and growth prospects.
InvestingPro Tips suggest a bullish outlook for XPO, with net income expected to grow this year and seven analysts having revised their earnings upwards for the upcoming period. The company's stock is also experiencing significant returns, with a one-week price total return of 26.56%. However, potential investors should be aware of the stock's volatility and the fact that it is currently trading at a high earnings multiple of 71.63. Additionally, XPO does not pay a dividend to shareholders, which may influence investment decisions depending on individual investor preferences for income-generating stocks.
For those interested in a deeper dive into XPO's performance metrics and strategic insights, InvestingPro offers additional tips to help investors make informed decisions. There are 16 more InvestingPro Tips available for XPO, which can be accessed at https://www.investing.com/pro/XPO. To enhance your investing experience, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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