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XPO’s Stock Price Continues to Soar: Investors Showing Confidence in the Company



Key Points
XPO Logistics stock is experiencing a significant increase of nearly double digits in Friday’s trading session.
Investors have shown a great deal of faith and confidence in the company’s potential for the future.
Despite some minor contractions throughout the year, the focus remains on the promising outlook for XPO.
5 stocks we prefer over Schneider National
Shares of XPO NYSE: XPO have been skyrocketing since the first quarter of 2023, surpassing all expectations and delivering an impressive 165% gain in less than six months.
Some market participants speculate that this rally may have reached its peak, but going against the trend would not be wise.
During Friday’s trading session, XPO Logistics stock rose by up to 8% as investors absorbed the latest second-quarter 2023 earnings release. Traders and other market participants are looking for developments that could justify further momentum in the stock, while pessimists are inevitably searching for signs of slowdowns and a subsequent decline.
Pessimists will not only have to confront the strong upward trend in the stock, but also the overall market sentiment, which has rewarded this stock handsomely. With the stock rising by nearly double digits and poised to surpass its previous all-time high, it presents an optimistic outlook for the company despite occasional cyclical slowdowns in financials.
Market Sentiment
The initial signals in financial markets, often referred to as the “popularity contest,” can serve as a valuable tool for investors to gauge sector favoritism. Since bias tends to lead to higher returns and sustained momentum, understanding the varying returns in the logistics and trucking sectors can provide initial insights.
XPO has surpassed other mid-capitalization competitors (companies with a size between $2 billion to $10 billion), outperforming names like ArcBest NASDAQ: ARCB and Schneider National NYSE: SNDR. Over the past 12 months, ArcBest achieved a respectable 34.5% return, while Schneider rose by 28.2%. These returns may be satisfactory for most investors, but those seeking significant wealth accumulation may envy those who invested in XPO. The forward price-to-earnings ratio evaluates the expected earnings for the next 12 months instead of the past 12 months, as traditional P/E ratios attempt to do.
The market has assigned a higher perceived value and “quality” to each dollar of future earnings expected from XPO — in comparison, peers like ArcBest and Schneider trade at lower ratios of 12.0x and 13.9x, respectively. Value investors should take this into consideration.
Outlook and Market Focus
In the company’s second-quarter investor presentation, stakeholders can review management’s value proposition, which explains the rationale behind investing in the company. From 2021 to 2027, management is committed to maintaining key performance indicators within a specific range and assessing the market’s confidence through valuation multiples and price performance — solid expectations.
XPO experienced a slight decrease in revenue, 6.3%, primarily due to lower fuel surcharge revenue, which can be attributed to volatile swings in oil markets. As investors look to the future, maintaining revenue within management’s projected range of 6% to 8% in the coming years would be advantageous, especially for a company of this size.
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