XPO CEO: U.S. economy ‘seeing signs of improvement’

XPO CEO Mario Harik joins Yahoo Finance Live to break down fourth-quarter earnings, consumer demand, buying patterns and trends, revenue growth, and the outlook for XPO.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: Earnings at XPO provided an upbeat outlook for the current state of the industrial economy with shipping volumes up about 1 and 1/2%. Revenue up 33% year-over-year. There was some concern over pricing.

XPO CEO Mario Harik joins us now for his outlook on 2023. Mario, it's good to see you. First of all, for folks who are not familiar, XPO concentrates on less-than-truckload logistics. In other words, kind of putting different loads together to make a full truckload.

So just give us sort of the big picture view, first of all, on what you're seeing in terms of demand. And what it tells us about the economy and what's going on around the country.

MARIO HARIK: You got it, Julie. First, thanks so much for having me on. So when we look for us in the fourth quarter, we actually grew tonnage or volume in what was a soft economy. However, that was not the case for the industry as a whole. The industry has seen a slowdown in tonnage in the fourth quarter.

However, looking here at the month of January that just past, we are seeing strength in terms of demand. It's still softer than what it was last year. However, it strengthened from what we saw in the back half of the fourth quarter, as we head into the beginning of the year.

Now, if you take a step back for 2023, I'm cautiously optimistic. We'll see what the freight markets do as we go along through the course of the year. But we are seeing signs of improvement from both retail and industrial customers.

BRAD SMITH: Within those customers, what are some of the profiles of those customers that you're seeing added on for those net-new customers and additions to the network?

MARIO HARIK: Yeah, so when we look at-- our customers today, 2/3 of the customers are industrial customers. And then the balance is our retail/consumer type customers. In terms of the customers, we are onboarding. We are onboarding an equal amount of customers in the existing mix that we have.

Now, the feedback within these verticals, what we are hearing starting with the retail side, we had seen a sequential decline of freight demands for retailers in the fourth quarter, as they were working through their inventories that were built up over time. But now looking at 2023, the feedback we get from retailers is that they are gonna get back to more normal seasonal buying patterns through the course of the year.

For industrial companies, it is a mix. For auto companies, they had pent-up demand last year and the supply chain is easing so they're seeing more strength. Same thing with short cycle manufacturing that is outlining robust 2023, as well as machinery customers are seeing more strength than the other parts of the industrial economy.

BRIAN SOZZI: Mario, March is a very important month for your business. What are you hearing from clients in terms of demand as you look out to that month?

MARIO HARIK: Again, it's been mixed. What we are hearing from retailers, it's better than what they saw in the fourth quarter. But it does vary by retailer and how much progress they have made through-- working through their built-up inventories. On the industrial side, again, for auto customers, we're seeing quite a bit of strength. Same thing with short cycle manufacturing, we're seeing quite a bit of training strength.

Now, for us, specifically, though, we're excited about winning more business. In the fourth quarter, we onboarded a record amount of new business. And we are seeing that in our numbers in terms of profitable tonnage that we onboarded in the fourth quarter and the third quarter, that is being a tailwind for us and volumes in the first quarter, as well.

JULIE HYMAN: Mario, we've been talking all about the US, of course. Us being a little US-centric, but let's talk about Europe, too, because that's a big segment of your business, a little less than half. What are you seeing over there considering that economic growth there, there's even more concerns around that than there is here?

MARIO HARIK: So in the fourth quarter for us in Europe, we grew revenue on a constant currency basis by 9%. And we grew our adjusted EBITDA by 10% on a constant currency basis. Now, it is mixed. We are seeing organic growth. We are seeing strength and pricing, as well. Specifically the UK and Spain are seeing strength from that perspective. But France is seeing a bit more softness here early in the year.

JULIE HYMAN: Mario, great to see you. Thanks for being here. Mario Harik is CEO of XPO. Thank you.

MARIO HARIK: Thanks so much for having me.