Yahoo Finance RXO CEO ‘cautiously optimistic’ about economic rebound by end of 2023
Logistics companies and freight brokers such as RXO (RXO) might be seeing the first signs of a rebound, even as the U.S. economy continues to feel the chill of high inflation and a still-hawkish Federal Reserve.
“As I look into what is going to happen for the rest of 2023, we’re seeing a tight macro in the first and second quarter, but we’ve got some reasons to be cautiously optimistic as we head towards the back half of the year,” Drew Wilkerson, chief executive officer of RXO, said in an interview with Yahoo Finance Live (video above).
The freight trucking industry experienced a steep slowdown in 2022 as the pandemic-era demand for goods retreated and a higher number of truck drivers, who entered the market to cater to that demand, led to increased capacity and lower rates.
According to FreightWaves, an industry publication and price reporting agency, the percentage of loads rejected by carriers is at 3.76% — the lowest level since the first COVID-19 lockdowns went into effect — indicating slack in the capacity side of the market.
However, things may start to improve as U.S. economic growth picks back up.
Wilkerson noted that customers who were previously talking about destocking their inventories over the last six to nine months have begun switching to restocking — a hint that logistics could be the first to witness a turnaround.
RXO released its fourth-quarter earnings on Tuesday, the digital freight broker's first since its spin-off from XPO Logistics (XPO) in November as XPO sought to become an asset-light proposition for investors seeking a more focused company.
Although Wilkerson acknowledged lean times in the U.S. economy, the company posted 4% year-over-year freight brokerage volume growth, a strong figure in a key metric for the industry.
“E-commerce and retail were down, but we had a lot of other verticals that were up,” Wilkerson explained, pointing to sales growth in automotive, electronics, and healthcare. “We’re seeing more sales momentum than I’ve ever seen in my career.”
58% of RXO’s revenue during the quarter came from its truck brokerage operations, followed by last-mile logistics at 24%.
"Demand for our managed transportation and last mile services remained strong in the quarter," Wilkerson said in the earnings press release. "Also, our best-in-class technology continued to be adopted by some of the world’s largest and most well-respected companies."
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