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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuGXO Logistics’ growth story is being built beneath the surface, with accelerating new-business wins expected to drive future margin expansion. GXO’s long-term customer relationships and expertise in complex verticals strengthen its position as a go-to outsourcing partner. The company appears undervalued both to its own history and its competitors, providing investors an attractive entry point if management can clarify and deliver on long-term goals. GXO Logistics , the world’s largest pure-play contract logistics provider, is leveraging its scale and AI and automation innovations to convert new-business wins into revenue growth and margin expansion. With shares lagging peers and trading at an attractive valuation, there is an opportunity for investors to get in ahead of an investor day in November, where the company will provide greater visibility into its growth and margin trajectory, which could drive multiple expansion. Rising supply chain complexity, geopolitical uncertainty, tariffs and regulation are leading many companies to outsource their logistics. This is especially true for e-commerce operations with little to no physical assets nor the supply chain expertise to scale logistics quickly as their businesses are growing. Additionally, industries with intricate and unique supply chains, like temperature sensitive pharmaceuticals, have very few companies they can turn to that fully understand and have the capability to meet their logistical demands. GXO is often their first call. Organic growth a priority In 2011, serial entrepreneur Brad Jacobs through Jacobs Private Equity purchased a $150 million stake in Express-1 Expedited Solutions, which was renamed XPO Logistics. As CEO and chairman, Jacobs grew revenue from $175 million to $15 billion in just over four years. In 2020, XPO Logistics announced that it would spin off its logistics segment. The new company, named GXO Logistics for “game-changing opportunities,” focuses on end-to-end supply chain management that includes warehousing, transportation, order fulfillment, packaging and inventory management. The services are highly customized and customers sign long-term contracts. GXO has since expanded its U.K. presence by buying Clipper Logistics in 2022 and Wincanton in 2024. All told, the company has 154,000 team members operating more than 1,000 facilities in 26 countries. A little over a year ago, Patrick Kelleher, most recently North American CEO of DHL Supply Chain, took the reins as CEO, with a mandate to prioritize organic growth over acquisitions. Where it’s finding growth GXO is a secular growth story, meaning it is not as sensitive to the ups and downs of the economy. On the company’s second-quarter earnings call, Kelleher said he has been in the logistics industry for 32 years and “the industry has grown every single year over those 32 years.” Events like the financial crisis of 2008, Covid-19, tariffs and wars have been challenging for many businesses but not for logistics companies, according to the CEO. “As these headwinds come, supply chain efficiency becomes more important and outsourcing becomes a very easy lever for our customers to pull in order to drive those supply chain efficiencies more quickly in their business,” he said. “These headwinds, these changes, have always resulted in fueling additional growth for contract logistics and outsourcing.” Long-term contracts also help to protect GXO from any possible short-term changes in demand. “Sensitivity is further reduced by fixed-cost and fixed revenue-matching contract structures that include minimum volume levels, take-or-pay provisions, and cost inflation escalators,” Fitch wrote in a recent note affirming GXO’s credit rating. “GXO holds a resilient blue chip customer base with new customer wins having an average duration of ~5 years (with new contracts trending ~7-10 years) with a retention rate in the mid-to-high 90s,” TD Cowen analyst Jason Seidl wrote in a note after GXO’s second-quarter results. Building a durable competitive edge The company’s extensive physical footprint has been key to developing a loyal customer base. Truist analyst Lucas Servera also said it’s the reason why Amazon would have trouble competing with legacy logistics companies, barring a significant acquisition. The “decades long investment in terminal infrastructure, network density, freight handling capabilities, and service quality remain meaningful competitive advantages that cannot be replicated overnight,” Servera said in a note. GXO’s edge also comes from its focus on four strategic growth verticals: aerospace and defense, technology and data centers , industrials, and life sciences. In these markets, GXO uses AI and automation to create supply chains that are faster, more flexible, and more productive. About 40% of GXO’s new business is in these growth areas , which together represent a combined total addressable market of $230 billion. In the second quarter, new business wins rose 34% year-over-year to $410 million. GXO also is benefiting from the integration of Wincanton, which is expected to deliver $60 million in cost savings by the end of the year and assist in margin improvement. However, these factors aren’t showing up in GXO’s financial reports right away and may be one of the reasons the stock fell 9.1% after its latest results. “The key point investors are focused on is that organic revenue growth of 3.4% trailed expectations of 3.6%. In our view, this is the tail wagging the dog as new CEO Patrick Kelleher’s team is winning new contracts in new geographies/industries that will not show up in revenues for six to nine months,” writes Citizens analyst Jeff Kauffman. Seidl expects margin tailwinds will begin surfacing in the fourth quarter, with a ramp beginning in earnest in 2027. He thinks the lack of guidance on the magnitude of the change “likely stoked investor concerns.” Buy the dip? The sell-off in the stock could provide investors with an attractive entry point and several Wall Street analysts agree. “We would be buyers of weakness,” said Jefferies analyst Stephanie Moore. “Considering the long cycle nature of GXO’s business and the time to realize stronger margin and mix impact from new wins, we believe the 9% pullback in GXO (vs S & P500 -0.2%) was overdone,” UBS analyst Thomas Wadewitz wrote in an Aug. 5 research note. “[We] continue to believe there is more than 70% upside potential in the shares over a 24-month period,” said Kauffman. GXO currently has 17 buy, one hold and zero underperform ratings with an average price target of $68.54, according to LSEG. Citi analyst Ariel Rosa is among the buy ratings. “We see room for multiple expansion as the company’s margin improvement efforts take hold, driving our view that particularly in light of the post-earnings sell-off, we see a buy-the-dip opportunity for investors,” Rosa wrote in early August. Still, investors may be wanting more specifics, which should come during GXO’s investor day on Nov. 16. “Management continues to defer a significant amount of questions on margins, growth, and capital deployment to the investor day, which we expect could be a catalyst, assuming that GXO can build some new wins and organic revenue momentum into the event,” JPMorgan analyst Brian Ossenbeck wrote in a note. Valuation and competitors GXO is down 13.7% year-to-date and has underperformed many of its competitors. GXO trades at about 8x forward enterprise value-to-Ebitda, just below its four-year historic average of 9x and well below many of its peers such as Ryder System and C.H. Robinson Worldwide . Management appears to view GXO’s current valuation as an attractive entry point. “I would say that, where the stock price is at this point in time, we think it’s a great investment. And so therefore, we will continue to buy back shares here in the back half of the year,” said CFO Mark Suchinski on the earnings call. Conclusion With new-business wins gaining momentum, Wincanton synergies beginning to flow through and the November investor day on the horizon, GXO has several potential catalysts to narrow its valuation discount to peers. If investors gain confidence that GXO’s commercial momentum will translate into durable revenue and margin growth, its multiple could rerate and reward investors who buy ahead of that inflection. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. 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