In a challenging market, RXO faced a tough fourth quarter earnings report, which met pessimistic expectations. Nonetheless, the company sought to shift the narrative towards its positive developments.
During a recent earnings release, an interview with FreightWaves, and their quarterly conference call, RXO (NYSE: RXO) management sought to divert attention from another quarter marked by lower EBITDA and a net loss. Instead, they emphasized improvements within their own operations, asserting their readiness for potential recovery in the freight market.
The overall freight market is showing signs of recovery. However, this early stage is not particularly encouraging for brokers, as spot rates are increasing while contract rates remain stagnant, leading to tighter profit margins.
Drew Wilkerson, the CEO of RXO, opened the conference call by summarizing the market dynamics for brokers. “In December, we observed a month-over-month rate increase of approximately 15%, significantly outpacing our contractual sale rates,” he stated. “Meanwhile, demand remains lackluster, with insufficient spot loads to counterbalance the rising costs of purchased transportation.”
Wilkerson noted that the market’s strength could be seen in the volume of freight navigating through routing guides, successfully moving past numerous carriers.
This robust spot market activity is illustrated by the recent surge in the SONAR Outbound Tender Rejection Index.
In a pre-earnings interview with FreightWaves, Jared Weisfeld, the company’s chief strategy officer, mentioned that RXO had indeed seen a slight sequential increase in spot loads from the third to the fourth quarter, with further growth noted in January.
“If this trend continues in a more favorable demand environment, we can expect spot loads to become a more significant component of our offerings,” he stated.
However, CFO Jamie Harris, while outlining the first quarter outlook, indicated projected EBITDA would be lower than in the fourth quarter, suggesting that growth hadn’t reached a level sufficient to impact profitability. “In our brokerage sector, we’re not forecasting a notable increase in either spot opportunities or sales rates for the first quarter,” he commented during the earnings call.
Emphasizing AI Strategies
A significant hurdle for RXO has been persuading investors after the company’s stock price dropped about 25% over the past year. Similar to C.H. Robinson, RXO aims to demonstrate how integrating AI can enhance profitability. The consistent messaging from C.H. Robinson, which has seen its stock double in the last year, has positioned it as not just a logistics play but also an AI stock.
