Contract logistics company GXO (NYSE:GXO) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 25.5% year on year to $3.25 billion. Its non-GAAP profit of $1 per share was 5.8% above analysts’ consensus estimates.
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GXO Logistics (GXO) Q4 CY2024 Highlights:
- Revenue: $3.25 billion vs analyst estimates of $3.20 billion (25.5% year-on-year growth, 1.5% beat)
- Adjusted EPS: $1 vs analyst estimates of $0.95 (5.8% beat)
- Adjusted EBITDA: $251 million vs analyst estimates of $251.2 million (7.7% margin, in line)
- Adjusted EPS guidance for the upcoming financial year 2025 is $2.50 at the midpoint, missing analyst estimates by 19.1%
- EBITDA guidance for the upcoming financial year 2025 is $850 million at the midpoint, below analyst estimates of $894.2 million
- Operating Margin: 3.1%, in line with the same quarter last year
- Free Cash Flow Margin: 2.5%, down from 5.8% in the same quarter last year
- Organic Revenue rose 3.9% year on year
- Market Capitalization: $5.14 billion
Company Overview
With notable customers such as Nike and Apple, GXO (NYSE:GXO) manages outsourced supply chains and warehousing for various companies.
Air Freight and Logistics
The growth of e-commerce and global trade continues to drive demand for expedited shipping services, presenting opportunities for air freight companies. The industry continues to invest in advanced technologies such as automated sorting systems and real-time tracking solutions to enhance operational efficiency. Despite the advantages of speed and global reach, air freight and logistics companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, GXO Logistics grew its sales at an exceptional 14% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. GXO Logistics’s annualized revenue growth of 14.1% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. GXO Logistics recent history stands out, especially when considering many similar Air Freight and Logistics businesses faced declining sales because of cyclical headwinds.
This quarter, GXO Logistics reported robust year-on-year revenue growth of 25.5%, and its $3.25 billion of revenue topped Wall Street estimates by 1.5%.
Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, a deceleration versus the last two years. We still think its growth trajectory is attractive given its scale and implies the market is factoring in success for its products and services.
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Operating Margin
GXO Logistics was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.1% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.
On the plus side, GXO Logistics’s operating margin rose by 1.6 percentage points over the last five years, as its sales growth gave it operating leverage.
In Q4, GXO Logistics generated an operating profit margin of 3.1%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
GXO Logistics’s EPS grew at an unimpressive 6.7% compounded annual growth rate over the last five years, lower than its 14% annualized revenue growth. However, its operating margin actually expanded during this time, telling us that non-fundamental factors such as interest and taxes affected its ultimate earnings.
Diving into the nuances of GXO Logistics’s earnings can give us a better understanding of its performance. GXO Logistics recently raised equity capital, and in the process, grew its share count by 155% over the last five years. This has resulted in muted earnings per share growth but doesn’t tell us as much about its future. We prefer to look at operating and free cash flow margins in these situations. 
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For GXO Logistics, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.
In Q4, GXO Logistics reported EPS at $1, up from $0.70 in the same quarter last year. This print beat analysts’ estimates by 5.8%. Over the next 12 months, Wall Street expects GXO Logistics’s full-year EPS of $2.80 to grow 8.7%.
Key Takeaways from GXO Logistics’s Q4 Results
It was good to see GXO Logistics narrowly top analysts’ revenue expectations this quarter, but its organic revenue missed. On top of that, its full-year EPS and EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 5.3% to $40.50 immediately after reporting.
GXO Logistics’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
