When I last wrote on XPO Logistics (XPO) roughly a year ago, I wasn't all that interested in the shares
due to what I thought was an overheated valuation. Little did I expect
the chaos that would ensue, including a large M&A transaction that
never happened, the loss of a significant chunk of business from Amazon (AMZN),
significant high-level executive turnover, multiple EBITDA misses, and
persistent questions regarding the company's working capital management
and intrinsic growth capacity.
Although I still like
XPO's less-than-truckload (LTL) trucking operations and I believe the
contract logistics business may be underappreciated on its long-term
leverage to e-commerce fulfillment, I don't like the debt-funded share
buybacks, and I think the macro picture is getting more challenging. On
the other hand, there's a sizable short position here and the market
could reward performance that simply meets expectations in 2019. On top
of that, today's valuation seems to only be anticipating low
single-digit long-term FCF growth.
Read the full article here:
XPO Logistics Taking A One-Two Punch Of Slowing Macro And Persistent Business Quality Questions
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