XPO Logistics (XPO): AI-Driven Bullish Options Trade

XPO, Inc. is a leading provider of freight transportation services in North America and Europe. The company operates through two segments: North American Less-Than-Truckload ('LTL') and European Transportation. In North America, XPO provides LTL services to approximately 36,000 shippers, offering critical geographic density and day-definite domestic services. In Europe, XPO offers a range of freight services, including dedicated truckload, LTL, full truckload brokerage, managed transportation, and multimodal solutions. XPO differentiates itself through proprietary technology, including 'XPO Smart', which optimizes pricing, linehaul, pickup-and-delivery, and dock operations. The company focuses on providing reliable capacity, technological solutions, and problem-solving expertise to its customers.

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XPO's technical outlook is moderately bullish, driven by a recent surge in price. The stock closed at $140.74 on 2025-11-04, significantly above its 21-day EMA of $131.49 and 50-day SMA of $130.89, suggesting short to medium term upward momentum. Although the 200-day SMA is at $123.31, the price action displays a strong recovery from the low of $118.79 on 2025-08-01. The MACD indicator supports this bullish view, with the MACD line at 1.18 and the signal line at 0.06, indicating a strong upward trend. The RSI, at 58.04, is within a healthy range, suggesting the stock is neither overbought nor oversold. The stochastic oscillator shows the %K line at 81.01 and the %D line at 58.33, further reinforcing the upward momentum. While the ATR has increased to 6.19, implying higher volatility, the overall trend suggests continued price appreciation in the coming 1–3 months.

XPO's Q3 2025 MD&A presents a mixed picture with slight revenue growth but declining profitability in key areas. Consolidated revenue for the third quarter increased by 2.8% to '$2.11 billion' compared to 2024, while revenue for the first nine months was flat at '$6.15 billion'. However, after adjusting for foreign currency movements, revenue was essentially flat for Q3 and decreased slightly for the nine-month period, primarily due to a decline in North American LTL, driven by lower fuel surcharge revenue and shipments per day. In the North American LTL segment, revenue increased slightly by 0.3% to '$1.25 billion' for Q3, but decreased by 2.0% to '$3.67 billion' for the nine-month period. European Transportation revenue increased by 6.7% to '$857 million' for Q3. Adjusted EBITDA for the European Transportation segment decreased by 13.6% to '$38 million' for Q3. Cash flow from operations increased to '$760 million' for the first nine months of 2025, compared to '$619 million' in 2024. Capital expenditures are projected to be between '$600 million' and '$700 million' for the full year 2025. The company repurchased 388 thousand shares for '$50 million' in Q3. The company believes that its existing liquidity and sources of capital are sufficient to support its operations over the next 12 months.

XPO's Q2 2025 earnings call projects a moderately bullish outlook, driven by strong performance in a soft freight environment. The company reported adjusted diluted EPS of $1.05, 'exceeded expectations'. Despite a 3% year-over-year decline in LTL revenue (primarily due to fuel surcharge reductions), the company improved its adjusted operating ratio (OR) by 30 basis points year-over-year to 82.9%, outperforming normal seasonality. Management anticipates Q3 OR to be 'flattish on a quarter-over-quarter basis', a significant outperformance to normal seasonality. XPO is focused on above-market yield growth, with yield excluding fuel up 6.1% year-over-year, and is seeing benefits from local accounts and premium services. The company is also making strides in cost efficiency, reducing outsourced miles to 6.8% of total miles, leading to a 53% year-over-year decrease in purchase transportation expense. AI initiatives are also showing promise, with AI-powered linehaul models reducing normalized linehaul miles by 3%. While full year tonnage is expected to be down in the mid-single-digit range, management is confident in achieving 100 basis points of year-on-year OR improvement, making them 'the only LTL carrier improving margins again year-on-year'.

XPO exhibits a generally positive trajectory, although some inconsistencies warrant attention. Revenue has increased from $1,940 million in Q4 2023 to $2,111 million in Q3 2025, indicating growth. Gross profit ratio has shown fluctuation, starting at 0.1025 in Q4 2023 and currently at 0 in Q3 2025. The operating cash flow is generally positive, with the most recent quarter showing $371 million. Total debt has remained relatively stable, starting at $4,113 million in Q4 2023 and standing at $4,110 million in Q3 2025. The net income has shown an increase from $58 million in Q4 2023 to $82 million in Q3 2025. While the company is generating positive cash flow from operations, the fluctuating gross profit ratio should be monitored. Overall, XPO demonstrates revenue growth, stable debt, and positive operating cash flow, suggesting moderate financial health.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.