Dive Brief:

• The tonnage growth that XPO experienced in recent months coincides with the rebounding manufacturing sector, Chief Strategy Officer Ali Faghri said in an interview with Trucking Dive. He added the rebounding industrial sector appears to be “still in the early innings of a multi-year demand upcycle.”   
• Faghri’s optimism is based on the Institute for Supply Management’s Purchasing Managers’ Index for manufacturing, which in July marked seven consecutive months of expansion. He sees this as a good sign that manufacturing is growing, not contracting which bodes well for trucking.
• “When we speak with a lot of customers, there’s clearly a lot of pent up demand from multiple years of depressed capex,” Faghri said. “What we’re hearing from them is that it is more bullishness on the demand outlook here, not just in the back half of the year, but also as we head into 2027.” 

Dive Insight:

XPO credited the recovering industrial sector for its North American LTL segment posting Q2 revenues of $1.43 billion, up 15.2% year over year. LTL shipments per day also increased 2.8% YoY and tonnage per day also improved 1% from a year ago.

CEO Mario Harik said during the company’s Q2 earnings call July 30 that manufacturing has been starting to build momentum, following sluggishness that persisted for three years. For XPO, April tonnage was down 1.5% YoY but improved 0.5% in May, Faghri noted. By June, the number increased 4%, and in July, the carrier saw both shipments and tonnage per day increases exceeding 6% YoY. 

But XPO wasn’t alone in reporting improving business conditions in Q2. 

LTL carriers Saia and TFI International’s LTL segment, featuring TForce Freight, also reported increases in both metrics. ArcBest’s asset-based segment, featuring ABF Freight, reported a significant increase in tonnage. 

There are indications manufacturing growth may be sustainable as the ISM’s new orders and backlog metrics both were in expansion territory for the seventh straight month in July. The ISM’s other demand indicator, new export orders, flipped from contraction to expansion in July, while the customers’ inventories index showed “too low” inventory, a trend that’s been steady for nearly two years. 

Faghri told Trucking Dive the carrier added 2,700 new local customers in Q2 with much of that business on the industrial side. He added the carrier’s Q2 damage claims ratio was below 0.2%, a record low for the company, which also helped it secure new business. 

“Overall, LTL is about two-thirds industrial,” he said. “It’s relatively broad-based in terms of the type of customer that we’re winning.”  

Faghri said XPO is well positioned to gain more business in a recovering freight market. Its decision to acquire 28 service centers through the Yellow Corp. bankruptcy auction has given the carrier over 30% excess door capacity, “which is exactly where we want to be at the trough of the cycle,” he said. 

Even with other large name competitors including FedEx Freight and Amazon Supply Chain Services seeking a bigger share of the LTL segment, Faghri is confident in XPO’s growth strategy. He added the carrier covers 99% of U.S. zip codes as well as Canada and Mexico. XPO has around 19,000 doors today, Faghri said. 

“I think ultimately when you look at us, we have one of the largest networks in the LTL industry,” he said. “So ultimately, we think our network and our service is differentiated versus the competition and so overall, we don’t see those new entrants really impacting our strategy or our ability to continue to grow and support our customers over the next few years.”