Freight Delivery Company RXO (NYSE:RXO) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 52.6% year on year to $1.42 billion. Its non-GAAP profit of $0.04 per share was $0.01 above analysts’ consensus estimates.
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RXO (RXO) Q2 CY2025 Highlights:
- Revenue: $1.42 billion vs analyst estimates of $1.43 billion (52.6% year-on-year growth, 1% miss)
- Adjusted EPS: $0.04 vs analyst estimates of $0.03 ($0.01 beat)
- Adjusted EBITDA: $38 million vs analyst estimates of $33.24 million (2.7% margin, 14.3% beat)
- EBITDA guidance for Q3 CY2025 is $38 million at the midpoint, above analyst estimates of $37.33 million
- Operating Margin: 0.7%, in line with the same quarter last year
- Sales Volumes rose 1% year on year (4% in the same quarter last year)
- Market Capitalization: $2.39 billion
StockStory’s Take
Freight delivery company RXO’s second quarter results fell short of Wall Street’s revenue expectations, leading to a significant negative reaction from the market. Management attributed the quarter’s mixed performance primarily to ongoing softness in the freight market, persistent automotive sector headwinds, and a deliberate shift in customer mix within truckload brokerage. CEO Drew Wilkerson noted that a 45% increase in less-than-truckload (LTL) volume drove gains in brokerage, while truckload volumes declined due to both industry pressures and a focus on optimizing profitability. Wilkerson described the quarter as one where “our brokerage business outperformed the market and grew volume by 1% year-over-year, driven by 45% growth in less than truckload volume.”
Looking ahead, RXO’s guidance is shaped by continued uncertainty in the freight environment and the company’s progress on its technology integration. Management expects cost synergies from the Coyote acquisition and ongoing improvements in procurement to support margin expansion, even as automotive freight remains weak. CFO Jamie Harris indicated that “we are still operating within a soft freight market with limited spot opportunities,” while Chief Strategy Officer Jared Weisfeld emphasized that the company’s unified platform is delivering buy rate improvements and productivity gains. Management believes that as integration milestones are completed and the freight market stabilizes, RXO will be positioned to capitalize on both cost discipline and new business wins.
Key Insights from Management’s Remarks
RXO’s management pointed to technology integration, LTL volume expansion, and disciplined cost management as the main drivers of Q2 performance amid a challenging freight backdrop.
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LTL volume acceleration: Less-than-truckload shipments increased 45% year-over-year, reflecting RXO’s investment in technology and expanded carrier relationships. Management highlighted that LTL now represents over 30% of brokerage volume, up from just 10% at the company’s spin-off, and stressed its role as a stable margin contributor across cycles.
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Truckload optimization and headwinds: Truckload volumes declined, primarily due to automotive sector weakness and a focused effort to optimize price, volume, and service mix with customers. Management noted that this deliberate strategic shift resulted in some lost business but also improved gross profit per load by 7% sequentially, the strongest increase in three years.
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Technology platform integration: Successful migration of legacy Coyote systems and the formation of a unified tech platform enabled better transportation procurement, yielding immediate buy rate improvements of 30 to 50 basis points. Management expects further gains as remaining systems are decommissioned and customer migrations are completed by the end of the next quarter.
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Last mile organic growth: The last mile segment achieved 17% stop growth year-over-year, representing the fourth straight quarter of double-digit expansion. This growth was entirely organic, bolstered by cross-selling to Coyote-acquired customers and new wins with major brands in the big and bulky delivery market.
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Strong cash conversion: RXO generated a 58% adjusted free cash flow conversion in Q2, supported by harmonized working capital processes and ongoing cost discipline. Management sees these improvements as largely permanent and expects continued strong cash performance.
Drivers of Future Performance
RXO’s outlook is shaped by a soft freight market, continued technology integration, and anticipated cost synergies from the Coyote acquisition.
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Automotive sector remains a drag: Management expects persistent automotive freight weakness to weigh on both brokerage and managed transportation segments. While RXO is the largest provider of managed ground expedite services for automotive, leadership does not anticipate a near-term recovery in the sector but believes it will drive significant incremental margins when demand returns.
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Technology-driven productivity gains: The company’s unified platform is expected to further improve procurement efficiency and productivity, with management citing a 45% increase in loads per person over the past two years due to AI and automation. As integration milestones are completed, RXO anticipates additional operating leverage.
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Seasonality and market uncertainty: RXO projects that Q3 will reflect normal seasonal declines in last mile volume, but improved truckload profitability and lower expenses should offset these trends. Management cautions that broader macroeconomic and trade policy uncertainties remain key risks to sustained volume growth.
Catalysts in Upcoming Quarters
In future quarters, our analysts will monitor (1) the pace of technology integration and realization of Coyote-related synergies, (2) whether LTL volume growth can remain robust as RXO targets a higher mix, and (3) signs of stabilization or recovery in automotive and broader freight markets. Execution on further productivity improvements through AI and maintaining strong cash generation will also be key markers of RXO’s progress.
RXO currently trades at $14.62, down from $15.44 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).
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