What Happened?
Shares of freight Delivery Company RXO (NYSE: RXO) jumped 16.5% in the afternoon session after it reported decent first-quarter results and provided a much stronger-than-expected outlook for the second quarter.
While RXO's first-quarter revenue was flat year-over-year at $1.43 billion and the company posted an adjusted loss of $0.09 per share, investors focused on the optimistic forecast. The company guided for second-quarter adjusted EBITDA (a measure of profitability) to be between $27 million and $37 million. This projection was significantly ahead of analysts' expectations and represented a substantial improvement from the $6 million reported in the first quarter.
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What Is The Market Telling Us
RXO’s shares are extremely volatile and have had 45 moves greater than 5% over the last year. But moves this big are rare even for RXO and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 8.9% on the news that WTI crude jumped 3% to above $105 per barrel and Brent surged 5% to over $114, following the UAE's interception of Iranian missiles and renewed concerns about the Strait of Hormuz.
Fuel is the single largest variable cost line for trucking, rail, and parcel operators, and the sharp move higher immediately compresses operating margins unless carriers can pass through fuel surcharges quickly which is harder in a softening freight environment. Furthermore, with jet fuel reportedly trading near $4.56 per gallon, nearly double pre-war levels, and analysts warning of potential rationing in Asia and Europe, the entire global logistics chain faced both a cost shock and a routing problem.
RXO is up 75.9% since the beginning of the year, and at $22.59 per share, has set a new 52-week high. Investors who bought $1,000 worth of RXO’s shares at the IPO in October 2022 would now be looking at an investment worth $1,076.
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