XPO Logistics (NYSE:XPO) Stock To Outperform As Rebranding Con-Way Stalls

- September 6, 2016

Source: XPO

According to multiple sources, XPO Logistics (NYSE:XPO) is putting much of its pricey rebranding project on hold until further notice. Many of its 19,000 tractors and 47,000 trailers belonged to Con-Way before the two companies merged. XPO Logistics had set aside $25 million per quarter to rebrand these acquired assets, mostly with new stickers.

However, those stickers are reportedly peeling off Con-Way trucks. That has forced XPO to halt all re-branding nationwide until a solution is found. The company has not yet confirmed this to be true, but likely will when it reports third quarter earnings.

This is a project that was expected to complete by the end of 2016. The fact that XPO was forced to halt many of these initiatives early on in the quarter means that it could save quite a bit of cash in Q3. Unfortunately, XPO stock investors don’t know when rebranding was put on hold or how much XPO Logistics had already spent. What we do know is that those large stickers are expensive as is the manpower to remove and replace.

What this means for XPO stock

Even if XPO saves $12 million by halting the rebranding project, that could add $0.08 to $0.09/share in profits, and have a big effect on XPO stock. XPO Logistics delivered an enormous Q2 with an EPS of $0.35. It beat expectations by $0.20.

Furthermore, XPO management already told BNL Finance back in June that the company would be profitable “in the second, third, and fourth quarter.” Management added, “People don’t see the earning power at XPO.”

Yet despite putting its earnings power on display during Q2, Wall Street is still disrespecting the company to a large degree. The current EPS estimate for Q3 is $0.38/share. Notably, that’s only $0.04/share higher than analysts expected three months ago! This shows that XPO Logistics’s big second quarter did not do much to move the needle on analyst expectations.

As a result, XPO Logistics is well positioned to deliver yet another big earnings beat. In a market where $0.05/share can be the difference in 10% gains or losses after earnings, XPO stock owners should feel really good about the rest of 2016.

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