XPO Q3 Adjusted EPS Rises 59% as LTL Margin Expands

XPO reported double-digit revenue growth and sharply higher earnings for the third quarter of 2026, led by margin expansion in its North American less-than-truckload business. Adjusted diluted earnings per share rose 59% year over year, while the LTL segment’s adjusted operating ratio improved by 260 basis points to 80.1%, extending a three-year improvement achieved during what the company described as a historically soft freight environment.

For the quarter ended Sept. 30, XPO generated revenue of $2.37 billion, up 12% from a year earlier. Adjusted EBITDA increased 26.6% to $433 million from $342 million, and adjusted net income rose to $200 million from $128 million. Adjusted diluted EPS was $1.70, compared with $1.07 in the prior-year period.

On a GAAP basis, operating income was $288 million and net income increased 120.7% to $181 million. Diluted EPS was $1.53. Cash flow from operating activities totaled $415 million.

LTL margins expand as volume and yield rise

North American LTL revenue increased 17.4% to $1.47 billion. Revenue excluding fuel surcharges rose 8.5% to $1.15 billion, while fuel-surcharge revenue increased 66.5% to $323 million.

Daily tonnage grew 5% year over year and, according to XPO, performed better than normal seasonal patterns. Yield excluding fuel increased 3.6%, with gross revenue per hundredweight reaching $26.70, up from $25.71 in the first quarter and $26.09 in the second quarter. Revenue per shipment excluding fuel also improved sequentially.

The segment’s adjusted operating income rose 35% to $293 million, while adjusted EBITDA increased 26.3% to $389 million. Its adjusted operating ratio declined to 80.1% from 82.7%; a lower operating ratio indicates better operating profitability. On a GAAP basis, LTL operating income increased 36.5% to $284 million, and the operating ratio improved to 80.7% from 83.4%.

XPO attributed its LTL strategy to four operating priorities: improving service, investing in network capacity, increasing yield and reducing costs. The company reported a damage-claims ratio below 0.2% in the quarter and said damage frequency has improved by nearly 90% since the fourth quarter of 2021.

The carrier is also continuing to move linehaul activity in-house. Third-party carriers accounted for 5.6% of linehaul miles in the third quarter, down from 25.2% in 2020. XPO said this reduces its exposure to rising truckload rates and is intended to support network efficiency and incremental margins in a freight upcycle.

The company had 300 LTL service centers as of Sept. 30, with coverage reaching 99% of U.S. ZIP codes. It said excess door capacity exceeded 30%, providing room to handle additional demand.

European transportation earnings increase

XPO’s European Transportation segment recorded revenue of $900 million and adjusted EBITDA of $48 million. Adjusted EBITDA increased 26% year over year. The segment operates across France, Iberia and the UK, offering services including LTL, dedicated truckload, freight brokerage, warehousing, managed transportation and freight forwarding.

Capital spending and longer-term targets

For full-year 2026, XPO expects total gross capital expenditures of $500 million to $600 million, interest expense of $205 million to $215 million and pension income of approximately $14 million. Management also expects an adjusted effective tax rate of 23% to 24% and a diluted share count of about 118 million.

Through 2027, XPO is targeting North American LTL revenue compound annual growth of 6% to 8% and adjusted EBITDA compound annual growth of 11% to 13%, measured from 2021. It also targets at least 600 basis points of adjusted operating-ratio improvement over that period. The company plans to average LTL capital spending equal to 8% to 12% of segment revenue through 2027, with investments focused on fleet modernization, in-house trailer production and network capacity.

The outlook remains subject to freight demand, inflation, labor and equipment availability, fuel-price and surcharge movements, interest rates and XPO’s ability to match capital investment with customer demand. The company also identified execution risks involving pricing, cost initiatives, linehaul insourcing, technology deployment, cybersecurity, indebtedness and the recruitment and retention of qualified drivers and other employees.