Freight Delivery Company RXO (NYSE: RXO) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 57% year on year to $1.43 billion. Its non-GAAP loss of $0.03 per share was $0.01 below analysts’ consensus estimates.
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RXO (RXO) Q1 CY2025 Highlights:
- Revenue: $1.43 billion vs analyst estimates of $1.48 billion (57% year-on-year growth, 3.5% miss)
- Adjusted EPS: -$0.03 vs analyst estimates of -$0.02 ($0.01 miss)
- Adjusted EBITDA: $22 million vs analyst estimates of $22.7 million (1.5% margin, 3.1% miss)
- EBITDA guidance for Q2 CY2025 is $35 million at the midpoint, above analyst estimates of $34.37 million
- Operating Margin: -2.1%, in line with the same quarter last year
- Sales Volumes fell 1% year on year (11% in the same quarter last year)
- Market Capitalization: $2.7 billion
StockStory’s Take
RXO’s first quarter results reflected significant progress in business integration and technology upgrades, even as external market conditions remained soft. Management attributed performance largely to the successful integration of the Coyote acquisition, which enabled carrier and coverage operations to consolidate onto a single technology platform. CEO Drew Wilkerson highlighted a 26% year-over-year increase in less-than-truckload (LTL) brokerage volumes, offset by continued softness in full truckload and automotive-related shipments. The company also reported notable productivity gains, with technology-driven improvements raising efficiency by 17% over the past year. Wilkerson described the quarter as one where “productivity over the last 12 months increased by about 17%,” and pointed to the company’s asset-light model as a key factor in managing through volatility.
Looking ahead, RXO’s forward guidance is shaped by ongoing integration benefits, operational flexibility, and a cautious approach to market uncertainty. Management emphasized the potential for additional cost savings as technology and procurement systems from the Coyote acquisition are fully leveraged. CFO Jamie Harris noted, “We have significant opportunity to purchase transportation more effectively,” which could translate to meaningful margin improvements as the year progresses. While the company expects continued growth in LTL and last-mile services, executives cautioned that truckload volumes remain under pressure due to macroeconomic uncertainty and shifting customer strategies in response to trade policy changes. Management believes enhanced technology and scale position RXO for margin expansion once market conditions stabilize.
Key Insights from Management’s Remarks
Management pointed to integration synergies, LTL volume growth, and technology-driven productivity as primary factors shaping first quarter outcomes, while highlighting automotive headwinds and ongoing market softness as key challenges.
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Coyote integration milestone: The successful migration of both RXO and Coyote carrier and coverage operations onto one transportation management system (Freight Optimizer) allowed for better freight matching and improved scalability. Management emphasized the early realization of cross-company operational efficiencies.
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Raised synergy expectations: After reviewing integration progress, RXO increased its estimate for annualized cash synergies from the Coyote acquisition to more than $70 million, driven by operating expense reductions and capital expenditure savings. CFO Jamie Harris explained that these estimates exclude further potential benefits from optimizing transportation procurement and cross-selling opportunities.
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LTL volume strength: Less-than-truckload (LTL) brokerage volumes grew 26% year-over-year, in stark contrast to ongoing softness in the broader truckload market. Management attributed this outperformance to new customer wins and the company’s ability to offer integrated solutions for complex freight needs.
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Last-mile segment momentum: The last-mile delivery business saw a 24% increase in stops, benefiting from existing customer growth, new customer acquisitions, and expanded service in new markets. Management described last-mile as a “stable and growing source of EBITDA.”
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Automotive sector headwinds: Weakness in automotive volumes, particularly in managed transportation and expedited shipments, weighed on both revenue and gross profit. Harris quantified the impact as a $10 million year-over-year gross profit headwind, noting the higher margin typically associated with automotive-related freight.
Drivers of Future Performance
RXO’s near-term outlook is shaped by integration-driven cost efficiencies, LTL and last-mile growth, and ongoing caution about freight market demand.
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Procurement and synergy realization: Management expects further margin improvement as unified procurement and technology systems enable more effective purchase transportation. Early wins in cost reductions are expected to ramp up as contract rate increases phase in through the year.
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Continued LTL and last-mile expansion: Ongoing growth in less-than-truckload brokerage and last-mile delivery is expected to help offset softness in full truckload volumes. Management highlighted cross-selling opportunities and new customer wins as drivers of segment resilience.
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Freight demand uncertainty: Executives remain cautious about overall freight market demand due to macroeconomic headwinds, customer responses to tariff changes, and persistent automotive sector weakness. The company’s guidance incorporates a range of scenarios, with flexibility to further reduce costs if volumes deteriorate.
Catalysts in Upcoming Quarters
In coming quarters, the StockStory team will monitor (1) the pace and scale of realized cost synergies from the Coyote integration, (2) ongoing growth in LTL and last-mile delivery volumes, and (3) RXO’s ability to manage through continued softness in full truckload and automotive-related freight. Sustained productivity gains from technology investments and the impact of shifting trade policies will also be key signposts for future performance.
RXO currently trades at a forward P/E ratio of 58.5×. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).
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