April 21, 2016 - 8:52am EST by
2016 2017
Price: 33.67 EPS 0 0
Shares Out. (in M): 135 P/E 0 0
Market Cap (in $M): 4,540 P/FCF 0 0
Net Debt (in $M): 5,774 EBIT 0 0
TEV (in $M): 10,314 TEV/EBIT 0 0
Borrow Cost: Available 0-15% cost

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  • Highly Leveraged
  • Logistics
  • Rollup


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Since the Norbert and Con-way acquisitions now represent the majority of EBITDA and with a very levered balance sheet constraining them from doing more “deals” for the time being, we expect that it is going to become very difficult for management to hide the actual performance of the business.  Given the highly promotional statements the company continues to make, we don’t believe long investors are going to like flat/negative actual organic growth.


While XPO’s guidance is for $1.25 billion of EBITDA in 2016, the company indicated at a recent JPM conference presentation that they internally project $1.5 billion of EBITDA this year. Our 2016 EBITDA estimate is $1,141 million, which is 24% below their “public whisper” number and below the street.  Given the stock performance since the JPM conference, we believe their “public whisper” number is relevant.


Looking out, given the fact that base business has had no real organic growth over the last few years (beyond Con-Way cost cutting, which we do believe is real and is embedded in our numbers), we believe they are going to disappoint on an ever larger scale in 2017.


We believe that if XPO starts missing targets, the wheels could fall off rather quickly. Our target is a $17 stock price, which is ~50% below today’s levels and values XPO at 7.0x 2016 EBITDA (using the diluted share count of 135 million shares) – the 7.0x multiple is based on a weighting of where their peers actually trade given a large part of the business is now “asset heavy”.

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