XPO

XPO stock has delivered very strong returns over the past five years, yet the valuation signals are split, with the Discounted Cash Flow (DCF) intrinsic value estimate pointing to upside while market based multiples suggest the shares screen as expensive. In addition, the broader value score leans toward the stock not being a clear bargain. Over the past 5 years XPO has returned about 273%, which puts recent price action in the context of a stock that has already created substantial shareholder value. Recent upgrades to XPO's credit rating and the focus on tech driven freight efficiency can support confidence in future cash flows, while any slowdown in freight volumes or weaker industrial demand would put that cash flow outlook at risk. XPO scores 1 out of 6 on the broader valuation checks, which suggests the stock leans expensive rather than looking like an obvious bargain. The key question now is whether XPO's current price leaves enough room between the market value and the intrinsic value estimate suggested by the DCF work. Scan beyond XPO and compare it with other freight and logistics stocks that appear resilient on cash flows and debt using our curated solid balance sheet and fundamentals stocks screener (51 results) The Discounted Cash Flow model for XPO starts by projecting the cash the business could return to shareholders over time and then discounts those flows back to today. For XPO, the latest twelve month free cash flow sits at about $90.5 million, and the model assumes growing cash flows from this base rather than a shrinking profile. On those assumptions, the intrinsic value comes out at an estimated $235 per share. Set against the current share price, that DCF output implies XPO stock trades at roughly an 18.3% discount to the modelled value, so the shares screen as undervalued on this method. XPO’s recent S&P credit rating upgrade is cited as supporting the cash flow story because stronger debt metrics can make those projected future payments more secure. On this Discounted Cash Flow view, XPO appears undervalued relative to the cash the business is expected to generate. Our Discounted Cash Flow (DCF) analysis suggests XPO is undervalued by 18.3%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for XPO. The P/E ratio is a common way to check how much you are paying for each dollar of XPO earnings. XPO currently trades on a P/E of about 55.8x, which is well above the Transportation industry average of roughly 33.5x and also higher than the peer group average of about 31.0x. A tailored fair P/E ratio for XPO, which takes into account its sector, size and risk profile, is estimated at about 26.0x. Compared with the current 55.8x, this points to a wide premium that the market is already assigning to XPO stock on earnings. That premium means the broader checks flag XPO as overvalued on this market multiple, even alongside the support from the recent S&P credit rating upgrade. On the P/E test, XPO stock looks overvalued, with the market paying a high premium to the earnings level implied by the fair multiple. See what the numbers say about this price — find out in our valuation breakdown. XPO's valuation picture is mixed. Narratives on Simply Wall St's Community page aim to outline what trajectory for growth, margins and earnings would need to occur for the stock to be worth materially more or less than it is today. Each Narrative treats XPO's fair value as a thesis about how the business might develop over time, one that you can revisit as new information arrives, rather than a single point-in-time view. The community is split on XPO, with one camp arguing the stock still prices in too little of its LTL execution and another warning that rich expectations leave little room for error. Bull case: 17% undervalued Read the full Bull Case to see why XPO could be undervalued Bear case: 19% overvalued Read the full Bear Case to see why XPO could be overvalued Do you think there's more to the story for XPO? Head over to our Community to see what others are saying! XPO appears caught between two valuation perspectives. The Discounted Cash Flow (DCF) intrinsic value estimate indicates meaningful upside, while the P/E based view suggests the stock is already expensive relative to peers. The low broader value score implies that investors may want to treat the DCF gap as a starting hypothesis rather than a clear signal. The key issue is whether XPO can generate the cash flow growth required to support both its intrinsic value estimate and the high earnings multiple, or whether the current premium already reflects that potential and leaves limited room for disappointment. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include XPO. Have feedback on this article? Concerned about the content? Get in touch with us directly. 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C.H. Robinson Worldwide, Inc. CHRW delivered higher second-quarter 2026 earnings and wider adjusted operating margins despite a freight market that management still describes as being in the trough of the demand cycle. The result puts its productivity strategy under a useful stress test. The central question is whether Lean AI, disciplined revenue management and market-share gains can keep supporting operating leverage while freight rates and working-capital needs remain volatile. Revenues rose 19.3% year over year to $4.93 billion, while adjusted gross profit increased 6.5% to $738 million. Adjusted income from operations climbed 19.5% to $263.2 million, and adjusted earnings increased 24.8% to $1.61 per share. C.H. Robinson Worldwide, Inc. revenue-ttm | C.H. Robinson Worldwide, Inc. Quote Adjusted operating margin expanded 360 basis points to 34.7%. The quarter showed that CHRW converted a more modest increase in adjusted gross profit into a much faster rise in operating profit, even as the freight environment remained difficult. CHRW is embedding custom-built artificial intelligence into Navisphere to automate steps across the quote-to-cash process and improve costing, pricing and decision-making. Management said productivity in both North American Surface Transportation and Global Forwarding has improved more than 60% since the end of 2022. Second-quarter operating expenses increased only 1% to $482.2 million, while average employee headcount fell 10.8%. That cost discipline, combined with automation and revenue management, helped CHRW produce stronger operating leverage without relying on a broad freight-demand recovery. North American Surface Transportation revenues increased 23.1% to $3.59 billion. Combined truckload and less-than-truckload volume rose 1.5% year over year compared with a 3.3% decline in the Cass Freight Shipment Index, marking the 13th consecutive quarter of market outgrowth. J.B. Hunt Transport Services, Inc. JBHT is a relevant transportation-services peer when investors compare freight-cycle execution and cost discipline. XPO, Inc. XPO, another industry peer, provides an additional reference point as investors assess whether CHRW can sustain market outgrowth while protecting profitability. Cash generated from operations fell to $35.9 million from $227.1 million a year earlier. The decline mainly reflected a $227.3 million adverse swing in cash generated by changes in net operating working capital, driven by higher freight rates. CHRW still returned $301.3 million to shareholders during the quarter, including $226 million of share repurchases and $75.3 million of dividends. With long-term debt rising to $1.68 billion from $1.34 billion at the end of the prior quarter, cash conversion remains an important counterweight to the margin improvement. CHRW's second-quarter execution supports the case that Lean AI, revenue management and productivity can lift earnings through a weak freight cycle. The cash-flow decline and higher debt, however, show why stronger operating margins do not remove balance-sheet and working-capital risks. The stock currently carries a Zacks Rank #3 (Hold), with a VGM Score of B, a Growth Score of B, a Momentum Score of B and a Value Score of C. The B scores point to relatively favorable blended, growth and momentum characteristics, while the C Value Score is more neutral. Because Zacks Style Scores complement the Zacks Rank, the combination supports a measured view rather than a clear short-term buy signal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report XPO, Inc. (XPO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Image source: The Motley Fool. Thursday, July 30, 2026 at 8:30 a.m. ET Chairman and Chief Executive Officer - Mario Harik Chief Financial Officer - Kyle Wismans Chief Strategy Officer - Ali-Ahmad Faghri Operator: Welcome to the XPO Q2 2026 Earnings Conference Call and Webcast. My name is Sachi, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of the applicable securities laws which, by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of the factors that could cause actual results to differ materially is contained in the company's SEC filings as well as in its earnings release. The forward-looking statements in the company's earnings release made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements, except to the extent required by law. During this call, the company may also refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables are on its website. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the Investors section on the company's website. I will now turn the call over to XPO's Chairman and Chief Executive Officer, Mario Harik. Mr. Harik, you may begin. Mario Harik: Good morning, everyone, and thank you for joining us. I'm here with Kyle Wismans, our Chief Financial Officer; and Ali Faghri, our Chief Strategy Officer. This morning, we reported record second quarter results that demonstrate the increasing strength of our earnings power. Company-wide, we reported revenue, adjusted EBITDA and adjusted diluted EPS at the highest levels in our history. Excluding real estate gains, our adjusted EBITDA was up 25% year-over-year to $425 million, and adjusted diluted EPS was $1.64, up 56%. In North American LTL, we grew adjusted operating income by 36% on a 15% increase in revenue, highlighting the scalability of our network and the operating leverage in the business. We also brought down our adjusted operating ratio below 80%, which is a new record for us. That's a 300 basis point improvement from the second quarter last year and has significantly outperformed normal seasonality. The foundation of our outperformance continues to be the superior customer experience we deliver through disciplined execution amplified by our technology. Notably, we achieved a new service milestone with our damage claims ratio, bringing it below 0.2% for the second quarter in a row and to the best level in our history. This is a product of operational excellence, investments in capacity and proprietary technology working together to build customer satisfaction and trust. Another example is our reputation as one of the fastest and most reliable LTL network in the industry with broad geographic coverage and consistently high service levels. This ties directly to our gains in market share. In short, world-class service is the gateway to expanding our business and translating customer value into shareholder value. To accomplish this, we've engineered our network to support long-term growth while running efficiently across different demand environments. Since 2021, we've increased our trailer fleet by more than 30% and tractor count by more than 20% and expanded our network capacity with 15% additional doors. We've also invested in our workforce, improving retention while maintaining the ability to scale labor hours with demand. This gives us the capacity to take on substantially more volume in the recovery while maintaining service quality. Each of these investments strengthens our operating leverage, enabling us to grow efficiently now and over time. They also reinforce our commercial performance by creating more opportunities to increase wallet share, earn price and win new business. In the second quarter, our service quality helped us accelerate contract renewal pricing. And we're continuing to expand revenue streams with high-margin local customers and premium services where we have a meaningful competitive edge. These are all structural advantages inherent to our business. We're building our network for years of above-market pricing growth and profitable market share gains. Before I close, I'll spend a few minutes on our proprietary technology and its broad impact across the business. In the second quarter, we used our workforce planning technology to improve productivity by nearly 2.5 points versus last year, which outperformed our quarterly target of 1.5%. Another example is route optimization, which we discussed on our prior calls. Currently, more than 2/3 of our operations are using this technology for pickup and delivery, and we're seeing measurable results with fewer miles and more stops per hour. We're also seeing encouraging results from the pilot of our trailer loading technology. This application uses AI to assess images of freight placed inside the trailers and provide our dock workers with actionable feedback in real time. In the second quarter, at the pilot sites, load quality improved by more than 40%, while damages were reduced by 50%, contributing to both service quality and operating efficiency. As we grow the business and expand the use of our technologies, the financial, operational and competitive advantages will increase as well. In closing, the levers we executed on in the second quarter are firmly established as a foundation for outsized value creation. We'll continue to enhance our service, invest in capacity, drive above-market pricing growth and scale our proprietary technology to operate more efficiently. Our results reinforce our confidence in the strategy and the significant value it can create. And that value creation is underpinned by 2 key objectives: achieving an annual LTL operating ratio in the low 70s or better and generating billions of dollars of cumulative free cash flow in the coming years. With that, I'll turn it over to Kyle to walk through the financials. Kyle, over to you. Kyle Wismans: Thank you, Mario, and good morning, everyone. I'll walk through our financial results, followed by our balance sheet, liquidity and capital allocation. For the second quarter, we grew total company revenue 13% year-over-year to $2.4 billion. In our LTL segment, revenue increased 15% to $1.4 billion, reflecting an acceleration in both yield and volume growth. Turning to costs in LTL. Our expense for salary, wages and benefits increased 7% year-over-year or $46 million. Our productivity initiatives continue to help mitigate the impact of higher inflation and freight volumes. Our cost for fuel, operating expense and supplies increased 24% or $53 million, primarily due to higher fuel prices. While industry truckload rates trended up significantly throughout the quarter, our purchase transportation costs increased by just $8 million. This is because our in-sourcing strategy is performing as planned, reducing our exposure to truckload rate volatility. Our depreciation expense increased 5% or $4 million, consistent with our continued investments in the network to support long-term growth. Moving to profitability company-wide. We delivered $434 million of adjusted EBITDA. Excluding $9 million of real estate gains in the quarter, adjusted EBITDA increased 25%. Our LTL segment generated $390 million of adjusted EBITDA and improved margin by 310 basis points to 27.4%. Excluding real estate gains, LTL adjusted EBITDA increased 27%. Lastly, in LTL, we grew adjusted operating income 36% to $287 million. In our European transportation segment, adjusted EBITDA was $48 million. And in our Corporate segment, adjusted EBITDA was a $4 million loss. Returning to the company as a whole, operating income increased 37% year-over-year to $271 million. Net income was $162 million, representing diluted earnings per share of $1.36. On an adjusted basis, diluted EPS was $1.70. Excluding $0.06 per share of real estate gains in the quarter, adjusted diluted EPS increased 56%. Turning to our second quarter cash performance. We generated $207 million of free cash flow, and we had $298 million of cash on hand at quarter end after completing $101 million of net capital expenditures, $70 million of common stock repurchases and $70 million of term loan repayments. Combined with available capacity under our committed borrowing facility, total liquidity at quarter end was approximately $898 million. Our net leverage ratio improved to 2.1x trailing 12 months adjusted EBITDA compared to 2.3x at the end of the first quarter. We're driving meaningful increases in free cash flow generation through a combination of strong earnings growth and moderating capital expenditures. We now expect to more than double our free cash flow for the full year compared with 2025. This gives us greater flexibility in accelerating share repurchases while continuing to strengthen the balance sheet through debt paydown. In July, we paid down another $100 million on our term loan to start the third quarter, bringing our year-to-date debt paydown to $200 million. And with that, I'll hand it over to Ali to talk through our operating results. Ali-Ahmad Faghri: Thank you, Kyle. I'll begin with our LTL performance, where we delivered another quarter of profitable growth and record margins. For the full quarter, shipments per day increased 2.8% year-over-year, while weight per shipment declined 1.8%, resulting in 1% growth in tonnage per day. Importantly, volumes strengthened as the quarter progressed. Shipments per day increased 0.2% year-over-year in April, 3.3% in May and 5.1% in June. Tonnage per day followed a similar trajectory, improving from down 1.5% in April to up 0.5% in May, followed by a 4% increase in June. We saw the improvement continue in July with an estimated increase above 6% in both shipments per day and tonnage per day on a year-over-year basis and with weight per shipment roughly flat. All 3 metrics outperformed normal seasonal patterns. These trends reflect our ability to consistently earn profitable market share through world-class service in any economic backdrop. In the second quarter, this was amplified by a steady improvement in freight demand. Pricing remained a source of strength throughout the quarter. Yield, excluding fuel, increased 4.4% year-over-year and improved sequentially, supported by an acceleration in our contract renewal pricing. Revenue per shipment, excluding fuel, also improved both year-over-year and sequentially. We expect both metrics to continue improving sequentially in the third and fourth quarters as we align more of our pricing with the value we deliver and expand the mix of accretive business. Notably, given the improving trend we've seen in weight per shipment, we now anticipate revenue per shipment growth, excluding fuel, to accelerate more than we previously expected in the third and fourth quarters. This is a benefit to both revenue growth and profitability. Turning to our adjusted operating ratio in LTL. We improved OR in the second quarter by 300 basis points year-over-year to a new company record of 79.9%, outperforming normal seasonality by more than 100 basis points. Over the past 3 years, through a historic freight recession, we've improved OR by nearly 800 basis points with plenty of runway ahead. Our European business also delivered another strong quarter of growth on both the top and bottom lines. We reported record revenue in Europe, marking our 10th consecutive quarter of growth on a constant currency basis. Adjusted EBITDA increased 9% year-over-year, and we expect that growth to accelerate in the second half of the year. Before we move to Q&A, I leave you with 3 key takeaways from the quarter. First, we're consistently earning profitable market share with an expansive network differentiated by superior service and a commitment to continuous improvement. This is the basis of our value proposition. We're also driving above-market pricing growth while unlocking structural productivity gains through AI and other initiatives for network optimization. And finally, we expect our second quarter outperformance to accelerate as freight demand recovers. This is the latest validation of our ability to significantly expand margins over time. With that, we'll take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] The first question is from Ken Hoexter from Bank of America. Ken Hoexter: Great. Really great job and congrats on breaking sub-80% and outperforming seasonality again. Great to see. I guess maybe just talking about the outlook going forward. Ali, you're talking about accelerating earnings. I don't know if you want to put some parameters on that, if you're talking about levels of operating ratio performance or revenues. And then Mario, just at the end, you kind of ran through some of the AI stuff you're running -- rolling out and it reduced damages 50%, load quality increased 40%. These are massive numbers. Maybe put some numbers or frame the opportunity here for expenses going forward? Mario Harik: You got it, Ken. First, starting on outperformance, I'll start with the third quarter OR. We do expect another strong quarter for margin performance here in the third quarter. And as you know, Ken, normal seasonality for us is for OR to increase 200 to 250 basis points from Q2 to Q3, which normal seasonality put OR for the quarter north of 82%. But we do expect to significantly outperform that and for our OR to be below 81% here in the third quarter. And that's a strong outcome overall, and it implies another very strong quarter of year-on-year margin improvement and it's driven by a combination of price, accelerating volumes and cost efficiency, and it puts us firmly on track to outperform our full year target for margin improvement. In terms of technology, I mean, as you know, we've always been very tech forward in our thinking. And the solution you referred to, so it's a new solution we're launching for all of our dock workers that was here in pilot in the second quarter, where every time a dock worker is loading a trailer, they actually take photos every [ tier ] of the trailer. AI analyzes that photo in real time and tells them what they're falling short on loading, whether a certain pallet needs to be strapped to the wall of the trailer, where they're going to use an airbag or if they're not using safe stack bars. So all of that happens in real time so the dock workers can actually correct what is happening as they are loading the trailer. And we have seen tremendous success in the pilot so far, and we expect to roll this out across the entire network through the back half of the year. But similarly, all the other solutions around P&D, around dock efficiency, about labor planning, all of these have a massive runway ahead of us here. In the quarter, we improved productivity by nearly 2.5 points versus an expectation of 1.5. And again, the runway is massive ahead of us for all of these solutions. Operator: The next question is from Scott Group from Wolfe Research. Scott Group: So it seems like you're clearly going to exceed the margin target for the year. I don't know if you have an updated view on that. And then maybe just more importantly, longer term, [ Mario ], I thought I heard you say in the prepared comments like a low 70s OR. I don't know that I've heard you say that specifically before. So what's your -- what do you -- how do you think about the time line to get there that's, give or take, another 1,000 basis points of margin improvement? What are the incremental margins assumed with that or pace of margin improvement you think you can do the next bunch of years? Mario Harik: You got it, Scott. So first, I'll start for the full year margin outlook. Based on what we delivered so far in the first half of the year and our expectation for the third quarter, we do expect to outperform our initial outlook, which was to improve OR for the full year by 100 to 150 basis points. And we now expect full year margin improvement to be at least 200 basis points. And obviously, we'll see what the back half has in store for us. But first, Scott, if you look at the volume side, it has tracked well above seasonality here more recently. And we're seeing both our initiative in gaining market share as well as the positivity we're hearing from our customer translate into more freight on our trucks. As Ali mentioned in the opening remarks, we expect July to be above 6% of tonnage growth here. And that means that for the full year, we now expect tonnage to be up a few points relative to when we started the year where it was more of a flattish expectation. On the pricing side, the trends have been favorable, and we expect our pricing trend to continue through the rest of the year. And on the cost side, also our execution has been very strong through productivity, what I mentioned earlier on about the AI initiatives as well. So if you break it down, a lot of great momentum across all of these pieces, and that's going to enable us to outperform our initial full year expectation on margin improvement. In terms of getting to a low 70s and beyond OR, and this is what really gets us excited about the years ahead. If you look at it, today, we have a low teens pricing gap and opportunity that we're going to go get above market pricing growth. And if you look at it over the last 3 years, we have been outperforming the market on yield like almost 2 to 3 points, sometimes a bit more per year. And that's driven through the combination of -- from one perspective, our service product continues to improve, and we expect we can get a point of extra yield associated with that over a long runway, 5-plus years. And then the other 2 components are around premium services and continuing to grow with our small- to medium-sized customers. On premium services, if you recall, when we started our plan, we had 9% to 10% as a percent of revenue being accessorial revenue, and our goal was to get to 15% plus, and we're currently halfway through that, and we see a massive amount of opportunities as we onboard new customers on these services. And similarly, on local accounts, we are actually accelerating the growth with small- to medium-sized customers here in the -- both as the quarter progressed in Q2 and July, we've seen a further inflection and improvement there. But we're being able to onboard more of these customers who value service, value relationship. And our goal is to give them a delightful experience every time they ship with us, and we're seeing growth there as well. So that's the big opportunity, Scott, if you look at it, that double-digit pricing opportunity is what would get us there and beyond over the next, call it, 5-plus years. Operator: The next question is from Jonathan Chappell from Evercore ISI. Jonathan Chappell: Ali, you said you expect the 2Q outperformance to accelerate and then Mario insinuated something for 3Q without putting a pin on it. I wouldn't think you expect tonnage and shipments to continue to increase by 6% as per July. But if you play out the string on seasonality for August and September from where you're exiting July, what are we looking for from a volume perspective? And I get the revenue per hundredweight and revenue per shipment increasing sequentially. And where would that put you relative to kind of the normal seasonal trends on 3Q OR progression? Ali-Ahmad Faghri: Sure, Jon. So from a volume perspective, as Mario noted, July for us was up over 6% tonnage on a year-over-year basis. And that was about, call it, 4 points better than normal seasonality relative to the month of June. Typically, what we see is tonnage is usually down in that low to mid-single-digit range sequentially as you move from June into July. This year, it was flattish and so much better than normal seasonality. Now if you just roll forward that above seasonal trend we've been seeing through the rest of the quarter, that would put full quarter tonnage for us up somewhere closer to that mid-single-digit range on a year-over-year basis. And keep in mind, John, this does account for a comp dynamic we have in Q3 where August and September are tougher comps on a relative basis. However, if you zoom out that mid-single-digit tonnage growth we expect in the third quarter does imply a meaningful acceleration on a 2-year stack basis relative to the second quarter. And ultimately, that speaks to the momentum we're seeing from a demand perspective. Similarly, from a pricing standpoint, as Kyle noted, we do expect both yield and revenue per shipment ex fuel to increase sequentially here, both in Q3 and Q4. On a year-over-year basis, we would expect our yield to be up in a similar range as Q2. that's even with the improving weight per shipment trend we're seeing here more recently, as we noted, July weight per shipment was flat on a year-over-year basis. That's a great outcome as it points to an improvement in underlying core pricing. And ultimately, that improvement in weight per shipment is a benefit to revenue per shipment, which is why we do now expect our revenue per shipment ex fuel to accelerate year-over-year here in the third quarter to a greater degree than we initially expected. And ultimately, that's going to be accretive to both revenue and profit growth. And all of that, John, is what underpins the OR outlook that Mario referenced earlier, where we would expect our OR to meaningfully outperform seasonality in the third quarter to be below 81% here. Ultimately, how much below 81% is going to depend on how demand trends through the rest of the quarter. But we do expect another very strong quarter of margin outperformance here in the near term. Operator: The next question is from Richa Harnain from Deutsche Bank. Richa Talwar: I was hoping you could talk about the competitive dynamic a bit more. The strong July performance definitely stands out. And I'm wondering if that's -- there's some validation in your outlook that as things start to heat up, maybe the smaller regional players you compete with struggle a bit more because they've already been operating at really high utilizations and you're getting that spillover freight? Or is this truckload coming back into LTL? Is that becoming a more prominent trend that you're seeing in your weight per shipment kind of improving? Or kind of just like what's going on in the competitive backdrop that's allowing the strong outperformance? Mario Harik: Yes. Richa, so if you look at -- there are a few dynamics there. The first one, as we've always discussed, industry capacity has been down over the last few years. Since the last peak in 2021, where we estimate service center count to be down, call it, about 10% as an industry and door count to be down mid-single digits over that same period of time. Now when that industry capacity was shrinking, it was at a time when industry demand was meaningfully down. It was down in the mid-teens through the industrial recession that we have seen over the last 3 years. So what we're seeing this year is a few dynamics. The first one is around having seen pent-up, effectively, demand for the industrial sector. Folks have not deployed enough capital in that industrial -- purchasing industrial goods across the country, and that's starting to come back. Now it's still not yet in full recovery territory because when you look at it, ISM has been in that low to mid-50s so far year-to-date, all expansionary, which is really good. But we haven't seen yet the over 60 type numbers, which is when the market is fully in upswing scenario. That said, on the demand side, we are getting a lot of positivity from customers. We -- as you know, we do a survey every -- before every earnings call. And our customers, we have now doubled the number of customers relative to the beginning of the year that do expect an acceleration in the back half of the year, which is very, very exciting. And we're starting to see that in existing customer demand starting to see a pickup in overall volume. Now when you break it down between retail and industrial, retail continues to be a positive territory. On the industrial side, what changed from last quarter is that we are seeing manufacturing starting to build momentum, and we haven't seen that in more than 3 years, which is fantastic to see. Now on the truckload, you referenced truckload to LTL conversion, we are in the early innings of seeing some of that where, as you know, truckload rates year-to-date are up more than 40% so far. And we are seeing some -- we estimate to be somewhere in the low to mid-single-digit total tonnage that has moved from LTL to truckload. And we expect that to come back to the back half of the year or going into next year as those -- if those truckload rates stay consistently high like they have been here so far with the increase year-to-date. And the last component, I would say we're taking market share. I mean, we're taking market share for 2 reasons. One is that we historically, a lot of the premium services that we are offering, we were not participants in. So we had very low market share, and we're growing those, whether it's grocery consolidation, whether it's must-arrive-by date, whether it's trade show shipping, whether it's new store rollouts. All of these are for us ramping over time, which is helping us gain market share. And as I mentioned earlier on, on local small- to medium-sized customers, we continue to grow that book of business as well. So all of these, I think, are what is kind of -- is what is causing that inflection in volume that we are seeing here and a meaningful step-up versus seasonal trends as well. Operator: The next question is from Stephanie Moore from Jefferies. Stephanie Benjamin Moore: Maybe touching on just the overall pricing environment. One, maybe I just misheard it, but I believe you said contract renewals have accelerated. So if you could just touch on that, again, apologies if I missed that. But in general, I mean, I think help us maybe bifurcate pricing actions that are more so driven by actions that are within your control and then pricing that might be -- or improved pricing that's driven by the underlying environment and what it seems to be just an overall stronger freight environment. Kyle Wismans: Sure, Stephanie. This is Kyle. So you're right. So when you think about contract renewals, they did accelerate. We're up in the mid- to high single-digit range. And I think what's important when you look at renewals and you look at the results is the strong flow-through we're seeing. So if you look at the second quarter as an example, I mean, obviously, that strong pricing that was above market really translated to strong OR outperformance. And you said in the quarter, we're 100 basis points better than normal seasonality, and we improved year-over-year by over 300 basis points. So I think what we're seeing right now is really a productive pricing environment. And we think that's going to continue as the market continues to improve. And as Mario said, we have a lot of different strategies that we're deploying to really continue to drive strong pricing here in the remainder of the year. Operator: The next question is from Jason Seidl from TD Cowen. Jason Seidl: Mario, team, nice job in the quarter and sort of impressive outlook here. A couple of questions. Given the better trends that you're seeing in terms of the demand side, and if we extrapolate them for 3Q and 4Q, where are you guys going to exit the year in terms of available capacity? And also, how should we look at head count given these better trends? . Mario Harik: Great question, Jason. So if you look -- if we first look at it on the capacity side for doors and equipment, I'll start with rolling stock. We're feeling great for rolling stock. I mean if you think about it, we've added more than 30% more trailers, more than 20% more tractors, and that's going to give us the runway for the next few years as we continue to invest in our fleet to be able to handle any demand environment. A similar dynamic for the door side. And usually, in a down cycle as an LTL carrier, having in excess of 30% door capacity is very helpful because that enables you to be able to take on more volume when the up cycle comes and you can support both your existing customers as well as gain profitable market share gains. And we're feeling great about where we are on that portion of it as well. And not all capacity, Jason, is created equal because you can imagine as a network business, you could have certain markets where you are short on capacity. And this is where we have done our investments. A lot of the investments we've done, whether it's in the South or the Southeast or the Southwest, were all driven in areas where historically we had capacity constraints, and now we are actually feeling great about where we are. If you look at a market like Nashville or Atlanta or in Texas or in the Midwest, I mean, we've done a really good job in complementing our network and adding those mega facilities in those very large markets to be able to support our customers in the context of an up cycle. On the labor side, on the headcount side, we feel very good about where we are right now. From our perspective, we continue to improve productivity, as I mentioned earlier, and that gives us an incremental amount of labor capacity where you can do more with the existing headcount that you have. Now if you look at over the last few years, we are only down slightly on headcount. So relative to where we were in the month of July, we can handle another low to mid-single digit more shipments with the existing workforce and by ramping up hours back up. But we've also been proactive in hiring as well based on what we're hearing from customers and what we're seeing in the demand environment. In some markets, we've already ramped up our hiring efforts, and we're seeing very, very good traction so far. Now if the industry demand recovery accelerates further from here and we see a hockey stick type demand recovery, we're also confident in our ability to further expand the workforce. As you know, our employee turnover is the best it's ever been, and we can spin up more than 130 driver training schools to help support our growth there as well. So on all aspects of capacity, we're feeling great. We're going to be right there to support our customers and grow with them in the context of a demand recovery. Operator: The next question is from Jordan Alliger from Goldman Sachs. Jordan Alliger: So it's been a while since weight per shipment, I think, got back to flat or positive. I'm just curious if you could give some thoughts from here. Is your expectation that, that will move into the positive at this point in time? And then just real quickly on just a price follow-up. If we do have that broadening industrial recovery that we're hoping for, given you're already seeing very strong pricing, can price be pushed up even further from here? Ali-Ahmad Faghri: Sure, Jordan. I'll start on weight per shipment and then pass it to Mario to talk about the pricing outlook. From a weight per shipment standpoint, we are seeing encouraging trends. Here in the second quarter, our weight per shipment improved by about 1 point on a year-over-year basis relative to the first quarter, also outperformed seasonality as we move from Q1 into Q2. Now here more recently, we've seen weight per shipment improve even further in the month of July, weight per shipment was flat on a year-over-year basis. That was also better than typical seasonality relative to July, and it's ultimately being driven by that improvement in the underlying industrial demand backdrop that Mario referenced earlier. If you just roll forward what we've been seeing here more recently, it would put weight per shipment down year-over-year in the third quarter. That does factor in a tougher comp that we had in the month of August, which subsequently gets easier in September. However, we do expect weight per shipment to be down less year-over-year in Q3 versus Q2. as you cycle into the fourth quarter, we do see a scenario where weight per shipment starts to inflect positive on a year-over-year basis entering 2027. Ultimately, that's going to be driven by the demand environment and how much further it improves from here. But we do expect weight per shipment to start to inflect positive on a sustainable basis over the next few months and as we enter the ending of the year. Mario Harik: And Jordan, when you look at the industry pricing overall, we are starting to see a more constructive industry pricing environment. As I mentioned earlier, you have a dynamic where you have demand in the early innings of picking up and then you have capacity that has gone out of the market. So we do believe that you're going to see an industry overall pricing recover over the quarters and years to come. Now the way we think about it, I mentioned earlier on the runway that we have above market to grow our yield performance, which is, call it, 2 to 3 points of outperformance between a premium on service, premium services and growing to small and medium-sized customers. Now in a soft macro environment, and as you know, we've been in a freight recession for 3-plus years, you see typically LTL pricing be up in that low single digit. And our expectation is that we will outperform that by 2 to 3 points on a consistent basis. As the environment starts picking up, you will see industry pricing go up mid-single digit, then we'd expect to outperform that. And then eventually, when the industry pricing gets up to mid- to high single digits in a full-blown recovery, we'd expect to outperform that by a few points there as well. So that's how we think about the trend. And we believe we are currently in the early innings of what would be a multiyear recovery with industry pricing going up, demand going up, being constrained by capacity for the players who haven't invested in growing capacity. Operator: The next question is from Chris Wetherbee from Wells Fargo. Christian Wetherbee: I wanted to ask about productivity. So you outperformed productivity target again in the second quarter, and you've done that a number of the last several quarters. I guess as we think forward, what I guess seems to be different is the fact that tonnage is inflecting more positively here, so you're able to get the productivity without the help of volume. I'd imagine productivity is probably a bit easier as we go with the volume growth. But maybe you could help sort of lay out what you think maybe is the right way to think about productivity. Is it still sort of 1.5 points on a year-over-year basis? Do you think it can be better kind of in a more favorable demand backdrop? Mario Harik: Well, overall, you're spot on that, Chris, whenever you see higher volumes, you tend to be more productive because you have more density in your network. As I said, these things are not linear in terms of how you improve that over time. And for us, our target is 1.5 points call it, over the next number of years based on all the solutions that we are deploying our AI capabilities and what we're doing. But we have been outperforming that number. When you look at the post-Yellow bankruptcy and you saw an uptick in overall freight volumes above seasonal trends, we also were able to improve productivity meaningfully higher over that period of time. But again, it's not linear. Our expectation is 1.5 points a quarter. And if you zoom out and you look on a multiyear trajectory, we do expect to outperform that as well, given our proprietary technology firing on all cylinders, but also obviously, field execution being very disciplined in how we're executing in the field. Operator: The next question is from Tom Wadewitz from UBS. Thomas Wadewitz: I wanted to see if you could offer a little bit of a thought on how inflation may affect the business. Obviously, you're seeing good price, good tonnage, great operating leverage. But how do you think about where maybe there is some inflationary pressures? And I guess I'm thinking comp and benefits in particular, that's your big expense line and maybe how that affected in 2Q and how you look forward with that. Also, I guess, related to that is just in the driver market. I think we've heard some feedback that some of the tightening in LTL aside from -- is maybe not terminal driven, but more so drivers getting a little tight. I don't know if you see that or if that's a factor in terms of how you look at inflation. Ali-Ahmad Faghri: Sure, Tom. So if you think about inflation, I think overall inflation, we see in the mid-single-digit range. And I think you're right. I think the core of that really is the wage inflation you would expect to see. And I think beyond that, I think more broadly, you'll see a point or 2 from particular health insurance, as you would expect. I think if you look at where we see that, we'll see that certainly on the SWB line we see in the second quarter. So we saw some inflationary pressure there this quarter. I think beyond that, obviously, something like higher volume shipments will play a factor there. We also did have some incentive comp. But I think the important point there is really the productivity. And Mario already spoke to productivity, but having 2.5 points of productivity in the quarter really helped us manage that. So when you think about the core inflationary pressure really being on labor, we're always going to look to manage labor and ensure labor is adjusted to the freight we have on the dock. And I think we've been effective in doing that, which you can see in the results. Mario Harik: And in terms of driver -- go ahead, Tom. Thomas Wadewitz: I was just going to say, like on the -- you mentioned some of the incentive comp or other pressure in 2Q. Is that -- like would we expect to see that 3Q looking forward as well? Or is some of that temporary 2Q. Ali-Ahmad Faghri: I think from what you'll see as far as the components that will impact us in the back half, I think you'll see some of the similar components. So certainly, the wage and benefit inflation will be there. The higher incentive comp will be there as well. I think the important point, though, that's contemplated in our outlook for the back half of the year. When you think about the overall OR for the year improved by more than 200 basis points, we're already taking that into consideration. Mario Harik: In terms of the driver market, Tom, so we are seeing the hiring market tighten. And we believe it's a component of that is what's happening in the truckload space where you have capacity that's going out. So you have a lot of the larger fleets and the larger carriers who are now hiring drivers as well. As I said, we -- given our benefits and comp packages for our drivers and given the fact that we have a very young fleet, I mean, our average truck age is sub-4 years. We've been very successful being able to add drivers in some markets where we needed to, and we have seen very good traction there as well. But the market is tightening on hiring as well. Operator: The next question is from Brian Ossenbeck from JPMorgan. Brian Ossenbeck: Maybe just real quick, first, commentary on fuel. Obviously, still swinging around a little bit, probably still a little impact on the current quarter and how you think about that in the outlook? And then just more broadly, maybe for Mario, can you just talk about the -- the mix seems to be shifting a little bit just based on the weight per shipment trends inflecting more positive. Can you just talk more about the 3PL layer, I guess, or that part of the structure? Because it seems like others are having problems with that in terms of their pricing. It looks like you're getting more industrial flow-through than maybe some other companies we've heard of so far. So I want to see if there's anything you can point to in terms of why there's a relative difference with some of your peers to the extent you have visibility on that? Ali-Ahmad Faghri: Sure, Brian. This is Ali. On the fuel side, when you look at our second quarter performance and our ability to outperform seasonality and deliver that 300 basis points of year-over-year improvement really goes back to the strong operational execution that we're delivering tied to our accelerating pricing, the profitable market share gains, the above productivity target that we're delivering. Now certainly, fuel helps. But I think if you zoom out and you look at over the last 3 years, we've delivered nearly 800 basis points of OR improvement in an environment where fuel was down for the majority of that period. And again, I think that speaks to the strong underlying operational execution that we're delivering. Here in the third quarter, based on what we're seeing with diesel prices, we do expect diesel prices to be down quarter-over-quarter and subsequently for our fuel revenue to also be down on a quarter-over-quarter basis. Even with fuel down quarter-over-quarter, we would expect to meaningfully outperform normal seasonality here in the third quarter and for the full year and deliver very strong performance. Now on the 3PL side, transactional 3PL mix is the smallest part of our business as a whole. And typically, what you'll see, Brian, is that carriers will work more with 3PL in softer volume environments like we've been in over the last few years. But then as demand improves, you'll typically see that come lower. And that's what we see here more recently. As our volumes have accelerated through the second quarter and into the third quarter, we've seen our 3PL mix decline on a sequential basis. Overall, if you zoom out, we're focused on OR accretive freight that fits our network. Ultimately, if it checks those boxes, we're going to pursue it. So we think about that business very similar to the rest of our book. Operator: The next question is from Ari Rosa from Citigroup. Ariel Rosa: Congrats on some nice results here. Guys, I wanted to ask about the performance in Europe. It seems like it continues to improve. Just maybe if you could speak to the sustainability of that, what you're doing differently there? And then I noticed the transaction and integration costs were somewhat elevated or maybe it was restructuring costs in the quarter. Maybe just speak to what that is and if that continues. Mario Harik: You got it. I'll start and then I'll turn it over to Kyle on the restructuring side and the near-term results. But high level in Europe, we are driving a similar plan to what we drove here in the U.S. in terms of cost control, leaning into sales and hiring more salespeople, growing into new verticals. For example, we didn't used to do any work in luxury goods or aerospace or health care or [ medical ] work or technology. And all of these are now verticals that we are actively pursuing. And we are on a very, very good trajectory of growth. We -- as Kyle mentioned earlier, we grew EBITDA in that business here in the second quarter in the high-single-digit range, and we expect to grow our EBITDA in the high teens in the back half of the year. So we're seeing a very good acceleration of results driven by the execution of our plan. Now ultimately, our goal is to sell that business and -- but we're patient, we want to get the right price for it. And when the time is right, we're going to sell that business based on that very strong momentum here on operating performance. Kyle Wismans: And in terms of restructuring costs, I think the majority of the costs we saw in the quarter relate to restructuring in Europe. And what we're doing there is really taking structural costs out. That was really some efforts focused on the salary and the functional support team that's really going to help them streamline the operation moving forward. I think what's important there is you're seeing it flow through in the results. As we said, you're up 9% year-over-year growth in the second quarter, and that growth is going to accelerate in the back half of the year within the European business. It's also important to note that sales restructuring spend that we're seeing in the second quarter will step down for the remainder of the year. Operator: The next question is from Bascome Majors from Stephens Inc. Bascome Majors: You've given us a bit of a look forward with the longer-term margin target quantified and talking about the yield spread that you expect to maintain and where the market might go if it continues to remain tightened. Can you give us a big picture look at what the cash flow and incremental margin algorithm might look like for the business over the next couple of years? I know you don't want to guide demand out that far, but just with all of the changes and acceleration and productivity that we've seen today, just update us on sort of the long-term algorithm in the business? Kyle Wismans: It's Kyle. So I want to start with free cash flow, and you can talk just about this year for a second. So if you look at '26, we started the year thinking we were going to improve free cash flow by 50% on a year-over-year basis. At this point, we're far ahead of that expectation. As we said in the prepared remarks, we now expect it to at least double year-over-year, really driven by 2 major factors. So one is continued ability to drive higher income and the second is CapEx moderating. If you think on long term, how that translates, we think our EBITDA conversion is going to continue to accelerate as earnings continue to grow. And we're going to have a moderation in our CapEx profile we've seen versus the last couple of years, which really means we're going to be able to generate billions of dollars of free cash flow over the coming years with compounding earnings growth and our ability to really accelerate both our share repurchase program and our debt paydown. So we're really excited about what cash can do for us and how it translates in the future. I think from the other standpoint from an incremental margin view, I think over the cycle, we think we can generate 40% incremental margins, and we've demonstrated that so far. It's going to depend on the mix of volume and price. But I think over the long term, as Mario talked about, we expect yield to be the bigger driver of the contributor to top line growth, and that's going to have very strong flow-through the bottom line. So we also talk about our yield initiatives, whether it's growing local, whether it's growing premium or otherwise, they're really early innings for us, and there's a long runway to growth. So we expect really, really strong incremental margin forward, at least in the 40% range through the cycle. Operator: Thank you. The next question is from Bruce Chan from Stifel. J. Bruce Chan: Just want to come back to some of the comments on demand. Mario, you mentioned that part of the volume outlook is coming from market share, which I think makes a lot of sense with your service levels and your sales force investments. But any sense for how much of that volume outlook is idiosyncratic versus what's coming from the market? And maybe as part of that, any color on what you're seeing by end market would be helpful, too. . Mario Harik: You got it, Bruce. Well, first, it's coming from the combination of 3 things I mentioned earlier on. From one perspective, we are gaining market share. From one perspective, we're starting to see truckload back to LTL conversion, but that's very early innings. And we're starting to see the industrial economy further strengthen as we are heading here into the back half of the year. So these are the 3. It's tough to estimate because in any given month, you have a combination of all of these things that kind of work in your favor. And we believe currently, the bigger component is our idiosyncratic market share gain levers. But at the same time, we're seeing the other 2 starting to contribute as well. And we're currently -- I mean, if you see there is a scenario here where you see both of these levers accelerate meaningfully in the back half of the year, that's not contemplated in our outlook yet. So obviously, we'll see if that industrial economy picks up from here and you see eventually start seeing a hockey stick type on the recovery on the tonnage side, but that's not contemplated in our outlook at this point in time. Now in terms of the market share gain, just to kind of give you some color, we spoke about small to medium-sized customers. If you look at last year, we were run rating with our very strong growth in that segment of business, we're roughly run rating at about 2,500 new logos, new customers a quarter in that particular channel. And here in the second quarter, we were at 2,700 to 2,800 customers that we have added. So a step up from where we were at the run rate of last year. Similarly, on premium services, I'm very proud of the team driving those on the sales side and the operations side to execute on them because we're seeing very strong momentum in those services as well that are contributing to our tonnage growth. In terms of end markets that we are seeing growth in, so high level, I'd say retail so far this year has been consistently positive, but modestly positive. But still the consumer is in a healthy place. We're still seeing that demand be in a good place overall. When I look at the industrial side, last quarter, we spoke about electrical being strong, chemical or industrial for chemical industry being strong, equipment for agriculture being strong, heavy equipment being strong. And now what we have seen here in the second quarter, especially as we progress through the quarter, is manufacturing is starting to build its momentum as well. And if that continues because that's one of the largest parts of the industrial cycle or industrial complex, we could see, obviously, things further improve in the back half of the year from an overall demand perspective. But generally, optimism on customers is higher. Demand is starting to pick up. Again, it's early innings. So there is a scenario here if we continue to see that ISM plays into higher industrial freight, where we see a stronger recovery even in the back half on the tonnage side. Operator: The next question is from Ravi Shanker from Morgan Stanley Investment Management. Ravi Shanker: Just a couple of follow-ups. Mario, I think you said you're going to have a double-digit pricing opportunity in the next 5 years. Can you just talk about what the slope of that looks like? And maybe remind us what the expected pricing lag in terms of timing might be relative to TL? And also, I think you said that you think the network can absorb about mid-single-digit volumes here before you start bringing resources back. It sounds like you're going to get there next quarter, unless I'm misunderstanding that comment. And so can you just talk about when and how much you think that resource addition might actually start to show up? Mario Harik: You got it, Ravi. Well, first, I'll start on the pricing opportunity. We do expect it to be fairly consistent in terms of outperformance. So we don't see the slope outside of the market pricing and what that does. But in terms of our outperformance or the double-digit opportunity, we see that as being fairly steady in that 2 to 3 points higher than market average pricing is the way we expect that to roll out over the next 5-plus years. And that will be driven by the 3 levers I mentioned earlier on. So taking a bit more price given the improvement in service quality and then obviously growing more from a mix perspective with the small to medium-sized customer and the premium services. And just to quantify them, Ravi, we estimate about 1 point coming from the better service product per year on top of what the market is doing, a point would be coming from our premium services growing and us taking market share in those. And some of these, we're still very, very early innings. If you look at a market like grocery consolidation, we still have a speck of that market, but we have a fantastic pipeline and the business keeps on growing in that segment of business, just as one example of those. But we would expect that as being roughly at a run rate of an incremental point per year on the price side. And the last component is for the small- to medium-sized customers. We do expect that to be at a clip of about 0.5 point of incremental price driven by that portion of business as we continue to grow. In terms of the network absorbing more volume, so we already have started in the second quarter our hiring efforts in some ramping up hiring in some markets. And we've had great success so far, Ravi, in that. As I mentioned earlier, the benefits we offer between the -- where our network is, the equipment that we have, we've been able to grow in a very, very good way in those markets we want to hire in. And obviously, we'll see where the market goes from here. So if we start seeing double-digit type tonnage growth, obviously, we're going to lean into the markets where we need the incremental folks and kind of go from there to add the people that we need. Operator: The next question is from Christopher Kuhn from StoneX. Christopher Kuhn: I'm just curious how the newer terminals have done that you've opened in the past couple of years and how that might be benefiting your overall performance? . Mario Harik: Overall, Chris, the new terminals have been fantastic for us. And the reason why because we already operate in all of the regions where we added those terminals. So from the ones we've added, around half of them were relocations when we went from a smaller terminal to a bigger terminal and the other half were incremental adds in existing markets. But just to kind of give you an example, I always give the example of, for us, the city of Nashville, where we used to have a location southeast of the city. And we -- given the amount of freight we used to break every night in that location, we used to handle, call it, 4 million pounds of freight in our overnight shift. And we didn't have enough door capacity or yard capacity to manage through that. So since then, we used to also, every day, dispatch about 35 drivers to go up north of the city of Nashville, up an hour north to get to Goodlettsville. So since then, we opened up a break bulk location west of Nashville, 250 doors, 50 acres of land, one of the largest terminal in the city of Nashville, and that enabled us to expand capacity, improve line haul efficiency. And then the new location in Goodlettsville enabled us to improve our P&D efficiency. So what we have seen is a step-up in both pickup and delivery and line haul efficiency in the markets where we opened up these locations in while giving us the runway to be able to handle much more customer freight in these markets where we needed it. So what we have seen so far a very quick ramp on productivity and improving of the operational performance from a cost standpoint, but also enabling us to handle more freight for the customers as well. We've executed on those in a very, very strong way. Operator: The next question is from Eric Morgan from Barclays. Eric Morgan: Maybe just a couple of quick ones. On line haul in-sourcing, I think your slides showed a slight uptick sequentially. I realize it's small, so maybe just noise, but curious if there's anything to call out there and where you might see that going from here? And on Europe, just given the momentum in that business, any update or progress on strategic alternatives that you'd call out? Mario Harik: Yes. I'll start on the European side. But as I mentioned earlier, our goal, Eric, is to eventually sell that business, but we are patient on the price we want to get. Now if you look at the capital markets in Europe and generally the economy in Europe, although our business is outperforming meaningfully what we're seeing in the market, that's not the case in Europe. So in Europe, overall, the economy, I would say, is flattish, slightly slow. But through execution, gaining market share, leaning on price, as I mentioned, leaning on cost control and efficiency, we have been able to outperform the market here. But at some point, when we get the right price for it, we're going to sell that business, and we're going to use the proceeds to further accelerate our capital return to shareholders is how we think about it overall. Eric Morgan: And then just quickly on the line haul miles. So our outsourced miles were in the mid-single-digit percentage range of total miles. That's actually the lowest level we've had in our company history. And if you look forward for the remainder of the year, it's a level we expect to be at for the rest of '26. We're in a great spot there. I think it really reflects what we've been able to do to insulate the P&L from any concern on truckload rates moving forward. So we feel like we're in a really good spot there for the remainder of the year. Operator: There are no further questions at this time. I would like to turn the floor back over to Mario Harik for closing comments. Mario Harik: Thank you, operator, and thank you, everyone, for joining us today. As you saw, our strategy has delivered another quarter of strong results, driving outsized value creation. And looking forward, we'll continue to grow the business, expand our margins and deliver higher free cash flow for years to come. With that, I'll ask the operator to please end the call. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in XPO, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and XPO wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $386,727!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,232,139!* That performance is why people listen. With a track record of beating the S&P 500 by 4x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 3, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends XPO. The Motley Fool has a disclosure policy. XPO (XPO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Make better investment decisions with Simply Wall St's easy, visual tools that give you a competitive edge. XPO (XPO) has drawn fresh attention after reporting second quarter 2026 earnings, with sales of US$2,355 million and net income of US$162 million from continuing operations, both above last year’s levels. See our latest analysis for XPO. At a share price of US$200.97, XPO has a 1-day share price return of 0.86%, while the 7-day and 90-day share price returns have declined 5.65% and 6.65% respectively. However, the 1-year total shareholder return of 69.18% and 5-year total shareholder return of 295.40% point to strong longer term momentum around the business as investors weigh the latest earnings beat, buyback activity and board changes. If XPO’s recent move has you thinking about what else is shaping freight and logistics, this is a good moment to scan 35 power grid technology and infrastructure stocks After a sharp multiyear run and a recent pullback, XPO now trades close to some valuation estimates and well below others. So where does fair value really sit in that spread as the stock resets around earnings? The most widely followed narrative for XPO puts fair value at about $156.57, which sits well below the recent $200.97 share price and frames the current optimism in a more cautious light. Read the complete narrative. Want to see what has to happen inside XPO for that fair value to make sense? The narrative leans on steadier revenue growth, wider margins and a richer earnings multiple that still pulls back from today. The detailed earnings ramp and profit assumptions are what really drive that $156 handle. Result: Fair Value of $156.57 (OVERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, if XPO converts ongoing tech investments into lasting cost savings and continues to expand its freight network efficiently, that could challenge this 28% overvaluation story. Find out about the key risks to this XPO narrative. The bearish narrative suggests XPO is 28% overvalued at $200.97, yet our DCF model points the other way. On this view, XPO trades about 9% below an estimated future cash flow value of $221, which frames today’s price as a discount rather than excess. Which story do you think fits better with your own assumptions? Look into how the SWS DCF model arrives at its fair value. Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out XPO for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity. With mixed signals on XPO’s value, this is a good time to check the underlying numbers for yourself and decide where you stand. To weigh both the concerns and the upside that investors see in the stock, start by reviewing the 3 key rewards and 1 important warning sign. If you are reassessing XPO after these results, do not stop here. Use this moment to widen your watchlist and pressure test fresh ideas with clear data. Spot potential value opportunities early and scan 55 high quality undervalued stocks that pair quality fundamentals with pricing that may not fully reflect them yet. Prioritise resilience and review 81 resilient stocks with low risk scores that score well on financial strength and business risk to balance more aggressive positions. Hunt for promising outliers and check the screener containing 19 high quality undiscovered gems that combine solid fundamentals with relatively low visibility among many investors. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include XPO. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Interested in XPO, Inc.? Here are five stocks we like better. XPO delivered record second-quarter results: Revenue rose 13% to $2.4 billion, while adjusted EBITDA excluding real estate gains increased 25% to $425 million and adjusted EPS climbed 56% year over year. North American LTL performance strengthened significantly: The segment’s adjusted operating ratio improved to a record 79.9%, and XPO raised its full-year operating-ratio improvement outlook to at least 200 basis points. Shipments and tonnage trends accelerated through the quarter, with July growth exceeding 6%. Cash flow and technology investments support the outlook: XPO generated $207 million in second-quarter free cash flow, reduced debt by $200 million year to date and expects to more than double full-year free cash flow from 2025 levels. The company also plans broader deployment of AI-based trailer-loading technology after pilot sites reduced damages by 50%. FedEx Unboxes Billions in Post-Spinoff Value XPO (NYSE:XPO) reported record second-quarter results, led by growth in its North American less-than-truckload business, higher pricing and productivity gains from technology initiatives. The company said it expects further margin improvement, faster free-cash-flow growth and continued volume momentum in the second half of 2026. Total revenue rose 13% year over year to $2.4 billion, while LTL revenue increased 15% to $1.4 billion. Adjusted EBITDA totaled $434 million; excluding $9 million of real estate gains, adjusted EBITDA increased 25% from a year earlier to $425 million. Operating income rose 37% to $271 million, and net income was $162 million, or $1.36 per diluted share. CFO Kyle Wismans said adjusted diluted earnings per share were $1.70, and excluding real estate gains, adjusted EPS increased 56% year over year. → Microsoft Just Flipped the AI Spending Narrative Overnight 3 Trucking Stocks Getting Big Analyst Upgrades Now The company’s LTL segment generated adjusted operating income of $287 million, up 36% year over year, and adjusted EBITDA of $390 million. The segment’s adjusted EBITDA margin improved 310 basis points to 27.3%. Most notably, XPO’s adjusted operating ratio in LTL improved 300 basis points from the prior-year quarter to a record 79.9%. Chairman and CEO Mario Harik said the company has improved its operating ratio by nearly 800 basis points over the last three years, despite what he characterized as a historic freight recession. → 2 Unique Space ETFs That Could Upend the Industry 3 Mid-Cap to Mega-Cap Stocks Have Announced Significant Buybacks “We’re building our network for years of above-market pricing growth and profitable market share gains,” Harik said. For the third quarter, Harik said XPO expects its LTL operating ratio to remain below 81%, despite normal seasonality that would typically cause the ratio to rise 200 to 250 basis points sequentially from the second quarter. He said the outlook reflects pricing, accelerating volumes and cost efficiency. → MarketBeat Week in Review – 07/27- 07/31 The company now expects full-year operating-ratio improvement of at least 200 basis points, compared with its prior outlook for improvement of 100 to 150 basis points. LTL shipments per day increased 2.8% in the second quarter, while weight per shipment declined 1.8%, producing tonnage-per-day growth of 1%. Volume trends improved during the quarter: shipments per day increased 0.2% in April, 3.3% in May and 5.1% in June. Tonnage per day moved from a 1.5% decline in April to increases of 0.5% in May and 4% in June. Chief Strategy Officer Ali Faghri said July trends continued to improve, with estimated year-over-year growth above 6% in both shipments per day and tonnage per day, while weight per shipment was roughly flat. XPO expects third-quarter tonnage to increase in the mid-single-digit range year over year, assuming above-seasonal trends continue. Yield excluding fuel rose 4.4% year over year in the second quarter, supported by faster contract-renewal pricing. Wismans said renewal pricing reached the mid- to high-single-digit range. The company expects both yield and revenue per shipment, excluding fuel, to improve sequentially in the third and fourth quarters. Harik said XPO sees a long-term opportunity to outperform market pricing by roughly two to three percentage points annually through improved service, premium offerings and growth with small and midsized customers. He said the company expects to add about one point of incremental pricing from service improvements, one point from premium services and roughly half a point from the customer mix over time. XPO attributed part of its margin expansion to proprietary technology and network investments. The company said workforce-planning technology improved productivity by nearly 2.5 points year over year in the second quarter, exceeding its 1.5-point quarterly target. More than two-thirds of XPO’s operations are using route-optimization technology for pickup and delivery, which the company said has reduced miles and increased stops per hour. A trailer-loading technology pilot that uses artificial intelligence to evaluate freight-loading images improved load quality by more than 40% and reduced damages by 50% at pilot sites, according to Harik. The company plans to deploy the trailer-loading technology throughout its network during the second half of the year. XPO also reported that its damage claims ratio was below 0.2% for the second consecutive quarter, its best level to date. Harik said the company has expanded its trailer fleet by more than 30%, tractor count by more than 20% and network door capacity by 15% since 2021. XPO believes its existing workforce and additional labor hours can support another low- to mid-single-digit increase in shipments, while it has already increased hiring in selected markets. XPO generated $207 million of free cash flow in the second quarter and ended the period with $298 million in cash and approximately $898 million in total liquidity. The company spent $101 million on net capital expenditures, repurchased $70 million of common stock and repaid $70 million of term-loan debt during the quarter. In July, XPO repaid another $100 million of its term loan, bringing year-to-date debt reduction to $200 million. Net leverage improved to 2.1 times trailing-12-month adjusted EBITDA from 2.3 times at the end of the first quarter. Wismans said XPO now expects to more than double full-year free cash flow from 2025 levels, aided by earnings growth and moderating capital expenditures. Over the cycle, he said the company believes it can generate incremental margins of at least 40%. In Europe, XPO reported record revenue and its 10th consecutive quarter of constant-currency growth. Adjusted EBITDA increased 9% year over year to $48 million. Harik said the company expects European EBITDA growth to reach the high teens in the second half, helped by cost actions, sales investments and expansion into verticals including luxury goods, aerospace, healthcare and technology. Harik reiterated that XPO ultimately intends to sell its European business when it can obtain what it considers the right price, with proceeds intended to support additional capital returns to shareholders. XPO Logistics, Inc is a global provider of transportation and logistics services, offering a broad portfolio of solutions designed to optimize supply chains for businesses of all sizes. The company's operations span freight brokerage, less-than-truckload (LTL) shipping, full truckload transportation, last-mile delivery, contract logistics and global forwarding. XPO aims to leverage advanced technology and operational expertise to drive efficiency, visibility and reliability across end-to-end supply-chain networks. In its freight brokerage segment, XPO connects shippers to a network of carriers through digital platforms that facilitate rate comparisons, booking, tracking and settlement. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "XPO Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

XPO, Inc. XPO highlighted accelerating operational momentum in its second-quarter earnings call, with management focusing on margin expansion, technology-driven productivity and improving freight trends. The company reported second-quarter adjusted earnings of $1.70 per share, which beat the Zacks Consensus Estimate of $1.49. Revenues of $2.36 billion also surpassed the Zacks Consensus Estimate of $2.28 billion. XPO, Inc. price-consensus-eps-surprise-chart | XPO, Inc. Quote Management emphasized that investments in network capacity, service quality and artificial intelligence are supporting profitable growth as freight demand improves. CEO and Chairman Mario Harik said XPO delivered record second-quarter results, driven by stronger North American Less-Than-Truckload performance and operating leverage. He noted that adjusted EBITDA, excluding real estate gains, increased 25% year over year to $425 million, while adjusted EPS rose 56%. The company’s LTL segment remained the primary growth driver. Harik said adjusted operating income increased 36% year over year, while the adjusted operating ratio improved to a record 79.9%, representing a 300-basis-point improvement from the prior-year period. XPO also reiterated its longer-term objective of reaching a low-70s operating ratio or better. Management tied that goal to pricing opportunities, premium services growth, local customer expansion and continued productivity improvements. XPO’s leadership highlighted artificial intelligence as a key contributor to efficiency gains. Harik said workforce planning technology improved productivity by nearly 2.5 points compared with the prior year, ahead of the company’s quarterly target of 1.5 points. The company is also expanding AI-based trailer loading technology across its network. Management said pilot locations achieved more than 40% improvement in load quality and a 50% reduction in damages through the technology. Harik told analysts that these initiatives remain in the early stages of deployment, with additional opportunities expected from route optimization, dock efficiency and labor planning tools. Management pointed to improving freight demand as another major factor supporting the outlook. Chief Strategy Officer Ali-Ahmad Faghri said shipments per day increased 2.8% year over year in the reported quarter, while tonnage per day increased 1%. The company saw momentum build throughout the quarter, with shipments per day growth improving from 0.2% year over year in April to 5.1% in June. Management said July trends showed tonnage growth above 6% year over year. XPO expects second-quarter operating performance to remain strong. Harik said the company further expects the adjusted operating ratio to be below 81% in the reported quarter compared with normal seasonal pressure that would typically push the metric above 82%. Pricing remained a central theme during the call. XPO reported that LTL yield, excluding fuel, increased 4.4% year over year, supported by stronger contract renewal pricing and improved revenue per shipment trends. Chief financial officer Kyle Wismans said contract renewals accelerated into the mid- to high-single-digit range, with pricing gains flowing through to operating performance. During analyst questioning, a Jefferies analyst asked about the sustainability of pricing improvements. Management responded that pricing remains supported by internal initiatives, service improvements and a more constructive freight environment. XPO highlighted its network investments as a key advantage entering a potential freight recovery. Harik said the company has increased its trailer fleet by more than 30%, tractor count by over 20% and network capacity with additional doors since 2021. Management said the added capacity positions the company to handle additional volume while maintaining service levels. Harik noted that workforce productivity improvements provide additional flexibility before significant labor expansion is required. On capital allocation, XPO generated $207 million of free cash flow during the second quarter and ended the period with $298 million of cash after capital spending, share repurchases and debt repayment actions. XPO’s management maintained a confident but measured outlook, emphasizing execution across pricing, productivity and market share gains. The company now expects full-year operating ratio improvement of at least 200 basis points, ahead of its initial expectation of 100 to 150 basis points. Management also said it expects free cash flow for 2026 to more than double compared with 2025, supported by stronger earnings and moderating capital expenditures. The company’s key priorities remain expanding margins, growing profitable freight volumes and scaling technology initiatives throughout the network. XPO carries a Zacks Rank #2 (Buy), indicating favorable earnings estimate revision trends relative to stocks with lower rankings. The Zacks Rank focuses on the direction and magnitude of earnings estimate revisions and can change as analysts update their expectations. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The stock has a Value Score of D, Growth Score of A, Momentum Score of A and VGM Score of B. Zacks Style Scores are designed to complement the Zacks Rank, with higher grades reflecting stronger characteristics in areas such as growth, value and momentum. For investors evaluating Zacks Rank #1 and 2 stocks, Style Scores of A or B can provide additional insight into characteristics associated with stronger potential performance. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report XPO, Inc. (XPO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved a record adjusted operating ratio below 80% by leveraging network scalability and disciplined execution, outperforming normal seasonal patterns by over 100 basis points. Attributed volume growth to idiosyncratic market share gains, particularly within small-to-medium sized customers and high-margin premium services like grocery consolidation. Improved productivity by 2.5 points through labor planning and dock efficiency solutions, while also piloting a new proprietary AI technology that provides dock workers with real-time trailer loading feedback. that reduced damages by 50% in pilot sites. Insulated the business from truckload rate volatility by reducing outsourced line haul miles to the lowest level in company history through a deliberate in-sourcing strategy. Expanded network capacity by 15% in strategic high-growth markets since 2021, providing the structural runway to absorb significant volume during the early stages of industrial recovery. Observed an inflection in manufacturing demand and a shift of freight from truckload back to LTL as industry pricing dynamics become more constructive. Raised full-year 2026 margin improvement guidance to at least 200 basis points, up from the previous range of 100 to 150 basis points. Anticipates third quarter operating ratio to remain below 81%, significantly outperforming the typical seasonal increase of 200 to 250 basis points. Expects revenue per shipment growth to accelerate in the second half of 2026 as weight per shipment trends toward positive territory by early 2027. Targets a long-term annual operating ratio in the low 70s or better, supported by a multi-year strategy to capture a double-digit pricing gap relative to the market. Projects free cash flow to more than double for the full year 2026, enabling accelerated share repurchases and continued debt paydown. Recorded $9 million in real estate gains during the quarter, which were excluded from core adjusted EBITDA growth calculations to reflect underlying performance. Implemented structural cost restructuring in the European segment to streamline functional support, contributing to an expected acceleration in EBITDA growth for the back half of the year. Maintains a patient stance on the eventual divestiture of the European business, waiting for optimal market conditions and valuation to maximize shareholder return. Noted a tightening driver labor market, though management remains confident in recruitment due to a young fleet age and competitive compensation packages. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management expects to consistently outperform market pricing by 2 to 3 points annually over the next 5-plus years. This outperformance is driven by three distinct levers: a 1-point gain from service quality improvements, a 1-point gain from premium service expansion, and a 0.5-point gain from SMB customer mix. July tonnage increased over 6% year-over-year, representing a 4-point improvement over normal seasonality relative to June. Management noted that while current guidance is strong, it does not yet contemplate a 'hockey stick' recovery in the industrial economy, which would provide further upside. The company targets 40% incremental margins through the cycle, with yield initiatives expected to be the primary contributor to bottom-line flow-through. Increased free cash flow generation provides flexibility to balance debt reduction with more aggressive share repurchases.

Image source: The Motley Fool. Thursday, July 30, 2026 at 8:30 a.m. ET Chairman and Chief Executive Officer - Mario Harik Chief Financial Officer - Kyle Wismans Chief Strategy Officer - Ali-Ahmad Faghri Operator: Welcome to the XPO Q2 2026 Earnings Conference Call and Webcast. My name is Sachi, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. Before the call begins, let me read a brief statement on behalf of the company regarding forward-looking statements and the use of non-GAAP financial measures. During this call, the company will be making certain forward-looking statements within the meaning of the applicable securities laws which, by their nature, involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those projected in the forward-looking statements. A discussion of the factors that could cause actual results to differ materially is contained in the company's SEC filings as well as in its earnings release. The forward-looking statements in the company's earnings release made on this call are made only as of today, and the company has no obligation to update any of these forward-looking statements, except to the extent required by law. During this call, the company may also refer to certain non-GAAP financial measures as defined under applicable SEC rules. Reconciliations of such non-GAAP financial measures to the most comparable GAAP measures are contained in the company's earnings release and the related financial tables are on its website. You can find a copy of the company's earnings release, which contains additional important information regarding forward-looking statements and non-GAAP financial measures in the Investors section on the company's website. I will now turn the call over to XPO's Chairman and Chief Executive Officer, Mario Harik. Mr. Harik, you may begin. Mario Harik: Good morning, everyone, and thank you for joining us. I'm here with Kyle Wismans, our Chief Financial Officer; and Ali Faghri, our Chief Strategy Officer. This morning, we reported record second quarter results that demonstrate the increasing strength of our earnings power. Company-wide, we reported revenue, adjusted EBITDA and adjusted diluted EPS at the highest levels in our history. Excluding real estate gains, our adjusted EBITDA was up 25% year-over-year to $425 million, and adjusted diluted EPS was $1.64, up 56%. In North American LTL, we grew adjusted operating income by 36% on a 15% increase in revenue, highlighting the scalability of our network and the operating leverage in the business. We also brought down our adjusted operating ratio below 80%, which is a new record for us. That's a 300 basis point improvement from the second quarter last year and has significantly outperformed normal seasonality. The foundation of our outperformance continues to be the superior customer experience we deliver through disciplined execution amplified by our technology. Notably, we achieved a new service milestone with our damage claims ratio, bringing it below 0.2% for the second quarter in a row and to the best level in our history. This is a product of operational excellence, investments in capacity and proprietary technology working together to build customer satisfaction and trust. Another example is our reputation as one of the fastest and most reliable LTL network in the industry with broad geographic coverage and consistently high service levels. This ties directly to our gains in market share. In short, world-class service is the gateway to expanding our business and translating customer value into shareholder value. To accomplish this, we've engineered our network to support long-term growth while running efficiently across different demand environments. Since 2021, we've increased our trailer fleet by more than 30% and tractor count by more than 20% and expanded our network capacity with 15% additional doors. We've also invested in our workforce, improving retention while maintaining the ability to scale labor hours with demand. This gives us the capacity to take on substantially more volume in the recovery while maintaining service quality. Each of these investments strengthens our operating leverage, enabling us to grow efficiently now and over time. They also reinforce our commercial performance by creating more opportunities to increase wallet share, earn price and win new business. In the second quarter, our service quality helped us accelerate contract renewal pricing. And we're continuing to expand revenue streams with high-margin local customers and premium services where we have a meaningful competitive edge. These are all structural advantages inherent to our business. We're building our network for years of above-market pricing growth and profitable market share gains. Before I close, I'll spend a few minutes on our proprietary technology and its broad impact across the business. In the second quarter, we used our workforce planning technology to improve productivity by nearly 2.5 points versus last year, which outperformed our quarterly target of 1.5%. Another example is route optimization, which we discussed on our prior calls. Currently, more than 2/3 of our operations are using this technology for pickup and delivery, and we're seeing measurable results with fewer miles and more stops per hour. We're also seeing encouraging results from the pilot of our trailer loading technology. This application uses AI to assess images of freight placed inside the trailers and provide our dock workers with actionable feedback in real time. In the second quarter, at the pilot sites, load quality improved by more than 40%, while damages were reduced by 50%, contributing to both service quality and operating efficiency. As we grow the business and expand the use of our technologies, the financial, operational and competitive advantages will increase as well. In closing, the levers we executed on in the second quarter are firmly established as a foundation for outsized value creation. We'll continue to enhance our service, invest in capacity, drive above-market pricing growth and scale our proprietary technology to operate more efficiently. Our results reinforce our confidence in the strategy and the significant value it can create. And that value creation is underpinned by 2 key objectives: achieving an annual LTL operating ratio in the low 70s or better and generating billions of dollars of cumulative free cash flow in the coming years. With that, I'll turn it over to Kyle to walk through the financials. Kyle, over to you. Kyle Wismans: Thank you, Mario, and good morning, everyone. I'll walk through our financial results, followed by our balance sheet, liquidity and capital allocation. For the second quarter, we grew total company revenue 13% year-over-year to $2.4 billion. In our LTL segment, revenue increased 15% to $1.4 billion, reflecting an acceleration in both yield and volume growth. Turning to costs in LTL. Our expense for salary, wages and benefits increased 7% year-over-year or $46 million. Our productivity initiatives continue to help mitigate the impact of higher inflation and freight volumes. Our cost for fuel, operating expense and supplies increased 24% or $53 million, primarily due to higher fuel prices. While industry truckload rates trended up significantly throughout the quarter, our purchase transportation costs increased by just $8 million. This is because our in-sourcing strategy is performing as planned, reducing our exposure to truckload rate volatility. Our depreciation expense increased 5% or $4 million, consistent with our continued investments in the network to support long-term growth. Moving to profitability company-wide. We delivered $434 million of adjusted EBITDA. Excluding $9 million of real estate gains in the quarter, adjusted EBITDA increased 25%. Our LTL segment generated $390 million of adjusted EBITDA and improved margin by 310 basis points to 27.4%. Excluding real estate gains, LTL adjusted EBITDA increased 27%. Lastly, in LTL, we grew adjusted operating income 36% to $287 million. In our European transportation segment, adjusted EBITDA was $48 million. And in our Corporate segment, adjusted EBITDA was a $4 million loss. Returning to the company as a whole, operating income increased 37% year-over-year to $271 million. Net income was $162 million, representing diluted earnings per share of $1.36. On an adjusted basis, diluted EPS was $1.70. Excluding $0.06 per share of real estate gains in the quarter, adjusted diluted EPS increased 56%. Turning to our second quarter cash performance. We generated $207 million of free cash flow, and we had $298 million of cash on hand at quarter end after completing $101 million of net capital expenditures, $70 million of common stock repurchases and $70 million of term loan repayments. Combined with available capacity under our committed borrowing facility, total liquidity at quarter end was approximately $898 million. Our net leverage ratio improved to 2.1x trailing 12 months adjusted EBITDA compared to 2.3x at the end of the first quarter. We're driving meaningful increases in free cash flow generation through a combination of strong earnings growth and moderating capital expenditures. We now expect to more than double our free cash flow for the full year compared with 2025. This gives us greater flexibility in accelerating share repurchases while continuing to strengthen the balance sheet through debt paydown. In July, we paid down another $100 million on our term loan to start the third quarter, bringing our year-to-date debt paydown to $200 million. And with that, I'll hand it over to Ali to talk through our operating results. Ali-Ahmad Faghri: Thank you, Kyle. I'll begin with our LTL performance, where we delivered another quarter of profitable growth and record margins. For the full quarter, shipments per day increased 2.8% year-over-year, while weight per shipment declined 1.8%, resulting in 1% growth in tonnage per day. Importantly, volumes strengthened as the quarter progressed. Shipments per day increased 0.2% year-over-year in April, 3.3% in May and 5.1% in June. Tonnage per day followed a similar trajectory, improving from down 1.5% in April to up 0.5% in May, followed by a 4% increase in June. We saw the improvement continue in July with an estimated increase above 6% in both shipments per day and tonnage per day on a year-over-year basis and with weight per shipment roughly flat. All 3 metrics outperformed normal seasonal patterns. These trends reflect our ability to consistently earn profitable market share through world-class service in any economic backdrop. In the second quarter, this was amplified by a steady improvement in freight demand. Pricing remained a source of strength throughout the quarter. Yield, excluding fuel, increased 4.4% year-over-year and improved sequentially, supported by an acceleration in our contract renewal pricing. Revenue per shipment, excluding fuel, also improved both year-over-year and sequentially. We expect both metrics to continue improving sequentially in the third and fourth quarters as we align more of our pricing with the value we deliver and expand the mix of accretive business. Notably, given the improving trend we've seen in weight per shipment, we now anticipate revenue per shipment growth, excluding fuel, to accelerate more than we previously expected in the third and fourth quarters. This is a benefit to both revenue growth and profitability. Turning to our adjusted operating ratio in LTL. We improved OR in the second quarter by 300 basis points year-over-year to a new company record of 79.9%, outperforming normal seasonality by more than 100 basis points. Over the past 3 years, through a historic freight recession, we've improved OR by nearly 800 basis points with plenty of runway ahead. Our European business also delivered another strong quarter of growth on both the top and bottom lines. We reported record revenue in Europe, marking our 10th consecutive quarter of growth on a constant currency basis. Adjusted EBITDA increased 9% year-over-year, and we expect that growth to accelerate in the second half of the year. Before we move to Q&A, I leave you with 3 key takeaways from the quarter. First, we're consistently earning profitable market share with an expansive network differentiated by superior service and a commitment to continuous improvement. This is the basis of our value proposition. We're also driving above-market pricing growth while unlocking structural productivity gains through AI and other initiatives for network optimization. And finally, we expect our second quarter outperformance to accelerate as freight demand recovers. This is the latest validation of our ability to significantly expand margins over time. With that, we'll take your questions. Operator, please open the line for Q&A. Operator: [Operator Instructions] The first question is from Ken Hoexter from Bank of America. Ken Hoexter: Great. Really great job and congrats on breaking sub-80% and outperforming seasonality again. Great to see. I guess maybe just talking about the outlook going forward. Ali, you're talking about accelerating earnings. I don't know if you want to put some parameters on that, if you're talking about levels of operating ratio performance or revenues. And then Mario, just at the end, you kind of ran through some of the AI stuff you're running -- rolling out and it reduced damages 50%, load quality increased 40%. These are massive numbers. Maybe put some numbers or frame the opportunity here for expenses going forward? Mario Harik: You got it, Ken. First, starting on outperformance, I'll start with the third quarter OR. We do expect another strong quarter for margin performance here in the third quarter. And as you know, Ken, normal seasonality for us is for OR to increase 200 to 250 basis points from Q2 to Q3, which normal seasonality put OR for the quarter north of 82%. But we do expect to significantly outperform that and for our OR to be below 81% here in the third quarter. And that's a strong outcome overall, and it implies another very strong quarter of year-on-year margin improvement and it's driven by a combination of price, accelerating volumes and cost efficiency, and it puts us firmly on track to outperform our full year target for margin improvement. In terms of technology, I mean, as you know, we've always been very tech forward in our thinking. And the solution you referred to, so it's a new solution we're launching for all of our dock workers that was here in pilot in the second quarter, where every time a dock worker is loading a trailer, they actually take photos every [ tier ] of the trailer. AI analyzes that photo in real time and tells them what they're falling short on loading, whether a certain pallet needs to be strapped to the wall of the trailer, where they're going to use an airbag or if they're not using safe stack bars. So all of that happens in real time so the dock workers can actually correct what is happening as they are loading the trailer. And we have seen tremendous success in the pilot so far, and we expect to roll this out across the entire network through the back half of the year. But similarly, all the other solutions around P&D, around dock efficiency, about labor planning, all of these have a massive runway ahead of us here. In the quarter, we improved productivity by nearly 2.5 points versus an expectation of 1.5. And again, the runway is massive ahead of us for all of these solutions. Operator: The next question is from Scott Group from Wolfe Research. Scott Group: So it seems like you're clearly going to exceed the margin target for the year. I don't know if you have an updated view on that. And then maybe just more importantly, longer term, [ Mario ], I thought I heard you say in the prepared comments like a low 70s OR. I don't know that I've heard you say that specifically before. So what's your -- what do you -- how do you think about the time line to get there that's, give or take, another 1,000 basis points of margin improvement? What are the incremental margins assumed with that or pace of margin improvement you think you can do the next bunch of years? Mario Harik: You got it, Scott. So first, I'll start for the full year margin outlook. Based on what we delivered so far in the first half of the year and our expectation for the third quarter, we do expect to outperform our initial outlook, which was to improve OR for the full year by 100 to 150 basis points. And we now expect full year margin improvement to be at least 200 basis points. And obviously, we'll see what the back half has in store for us. But first, Scott, if you look at the volume side, it has tracked well above seasonality here more recently. And we're seeing both our initiative in gaining market share as well as the positivity we're hearing from our customer translate into more freight on our trucks. As Ali mentioned in the opening remarks, we expect July to be above 6% of tonnage growth here. And that means that for the full year, we now expect tonnage to be up a few points relative to when we started the year where it was more of a flattish expectation. On the pricing side, the trends have been favorable, and we expect our pricing trend to continue through the rest of the year. And on the cost side, also our execution has been very strong through productivity, what I mentioned earlier on about the AI initiatives as well. So if you break it down, a lot of great momentum across all of these pieces, and that's going to enable us to outperform our initial full year expectation on margin improvement. In terms of getting to a low 70s and beyond OR, and this is what really gets us excited about the years ahead. If you look at it, today, we have a low teens pricing gap and opportunity that we're going to go get above market pricing growth. And if you look at it over the last 3 years, we have been outperforming the market on yield like almost 2 to 3 points, sometimes a bit more per year. And that's driven through the combination of -- from one perspective, our service product continues to improve, and we expect we can get a point of extra yield associated with that over a long runway, 5-plus years. And then the other 2 components are around premium services and continuing to grow with our small- to medium-sized customers. On premium services, if you recall, when we started our plan, we had 9% to 10% as a percent of revenue being accessorial revenue, and our goal was to get to 15% plus, and we're currently halfway through that, and we see a massive amount of opportunities as we onboard new customers on these services. And similarly, on local accounts, we are actually accelerating the growth with small- to medium-sized customers here in the -- both as the quarter progressed in Q2 and July, we've seen a further inflection and improvement there. But we're being able to onboard more of these customers who value service, value relationship. And our goal is to give them a delightful experience every time they ship with us, and we're seeing growth there as well. So that's the big opportunity, Scott, if you look at it, that double-digit pricing opportunity is what would get us there and beyond over the next, call it, 5-plus years. Operator: The next question is from Jonathan Chappell from Evercore ISI. Jonathan Chappell: Ali, you said you expect the 2Q outperformance to accelerate and then Mario insinuated something for 3Q without putting a pin on it. I wouldn't think you expect tonnage and shipments to continue to increase by 6% as per July. But if you play out the string on seasonality for August and September from where you're exiting July, what are we looking for from a volume perspective? And I get the revenue per hundredweight and revenue per shipment increasing sequentially. And where would that put you relative to kind of the normal seasonal trends on 3Q OR progression? Ali-Ahmad Faghri: Sure, Jon. So from a volume perspective, as Mario noted, July for us was up over 6% tonnage on a year-over-year basis. And that was about, call it, 4 points better than normal seasonality relative to the month of June. Typically, what we see is tonnage is usually down in that low to mid-single-digit range sequentially as you move from June into July. This year, it was flattish and so much better than normal seasonality. Now if you just roll forward that above seasonal trend we've been seeing through the rest of the quarter, that would put full quarter tonnage for us up somewhere closer to that mid-single-digit range on a year-over-year basis. And keep in mind, John, this does account for a comp dynamic we have in Q3 where August and September are tougher comps on a relative basis. However, if you zoom out that mid-single-digit tonnage growth we expect in the third quarter does imply a meaningful acceleration on a 2-year stack basis relative to the second quarter. And ultimately, that speaks to the momentum we're seeing from a demand perspective. Similarly, from a pricing standpoint, as Kyle noted, we do expect both yield and revenue per shipment ex fuel to increase sequentially here, both in Q3 and Q4. On a year-over-year basis, we would expect our yield to be up in a similar range as Q2. that's even with the improving weight per shipment trend we're seeing here more recently, as we noted, July weight per shipment was flat on a year-over-year basis. That's a great outcome as it points to an improvement in underlying core pricing. And ultimately, that improvement in weight per shipment is a benefit to revenue per shipment, which is why we do now expect our revenue per shipment ex fuel to accelerate year-over-year here in the third quarter to a greater degree than we initially expected. And ultimately, that's going to be accretive to both revenue and profit growth. And all of that, John, is what underpins the OR outlook that Mario referenced earlier, where we would expect our OR to meaningfully outperform seasonality in the third quarter to be below 81% here. Ultimately, how much below 81% is going to depend on how demand trends through the rest of the quarter. But we do expect another very strong quarter of margin outperformance here in the near term. Operator: The next question is from Richa Harnain from Deutsche Bank. Richa Talwar: I was hoping you could talk about the competitive dynamic a bit more. The strong July performance definitely stands out. And I'm wondering if that's -- there's some validation in your outlook that as things start to heat up, maybe the smaller regional players you compete with struggle a bit more because they've already been operating at really high utilizations and you're getting that spillover freight? Or is this truckload coming back into LTL? Is that becoming a more prominent trend that you're seeing in your weight per shipment kind of improving? Or kind of just like what's going on in the competitive backdrop that's allowing the strong outperformance? Mario Harik: Yes. Richa, so if you look at -- there are a few dynamics there. The first one, as we've always discussed, industry capacity has been down over the last few years. Since the last peak in 2021, where we estimate service center count to be down, call it, about 10% as an industry and door count to be down mid-single digits over that same period of time. Now when that industry capacity was shrinking, it was at a time when industry demand was meaningfully down. It was down in the mid-teens through the industrial recession that we have seen over the last 3 years. So what we're seeing this year is a few dynamics. The first one is around having seen pent-up, effectively, demand for the industrial sector. Folks have not deployed enough capital in that industrial -- purchasing industrial goods across the country, and that's starting to come back. Now it's still not yet in full recovery territory because when you look at it, ISM has been in that low to mid-50s so far year-to-date, all expansionary, which is really good. But we haven't seen yet the over 60 type numbers, which is when the market is fully in upswing scenario. That said, on the demand side, we are getting a lot of positivity from customers. We -- as you know, we do a survey every -- before every earnings call. And our customers, we have now doubled the number of customers relative to the beginning of the year that do expect an acceleration in the back half of the year, which is very, very exciting. And we're starting to see that in existing customer demand starting to see a pickup in overall volume. Now when you break it down between retail and industrial, retail continues to be a positive territory. On the industrial side, what changed from last quarter is that we are seeing manufacturing starting to build momentum, and we haven't seen that in more than 3 years, which is fantastic to see. Now on the truckload, you referenced truckload to LTL conversion, we are in the early innings of seeing some of that where, as you know, truckload rates year-to-date are up more than 40% so far. And we are seeing some -- we estimate to be somewhere in the low to mid-single-digit total tonnage that has moved from LTL to truckload. And we expect that to come back to the back half of the year or going into next year as those -- if those truckload rates stay consistently high like they have been here so far with the increase year-to-date. And the last component, I would say we're taking market share. I mean, we're taking market share for 2 reasons. One is that we historically, a lot of the premium services that we are offering, we were not participants in. So we had very low market share, and we're growing those, whether it's grocery consolidation, whether it's must-arrive-by date, whether it's trade show shipping, whether it's new store rollouts. All of these are for us ramping over time, which is helping us gain market share. And as I mentioned earlier on, on local small- to medium-sized customers, we continue to grow that book of business as well. So all of these, I think, are what is kind of -- is what is causing that inflection in volume that we are seeing here and a meaningful step-up versus seasonal trends as well. Operator: The next question is from Stephanie Moore from Jefferies. Stephanie Benjamin Moore: Maybe touching on just the overall pricing environment. One, maybe I just misheard it, but I believe you said contract renewals have accelerated. So if you could just touch on that, again, apologies if I missed that. But in general, I mean, I think help us maybe bifurcate pricing actions that are more so driven by actions that are within your control and then pricing that might be -- or improved pricing that's driven by the underlying environment and what it seems to be just an overall stronger freight environment. Kyle Wismans: Sure, Stephanie. This is Kyle. So you're right. So when you think about contract renewals, they did accelerate. We're up in the mid- to high single-digit range. And I think what's important when you look at renewals and you look at the results is the strong flow-through we're seeing. So if you look at the second quarter as an example, I mean, obviously, that strong pricing that was above market really translated to strong OR outperformance. And you said in the quarter, we're 100 basis points better than normal seasonality, and we improved year-over-year by over 300 basis points. So I think what we're seeing right now is really a productive pricing environment. And we think that's going to continue as the market continues to improve. And as Mario said, we have a lot of different strategies that we're deploying to really continue to drive strong pricing here in the remainder of the year. Operator: The next question is from Jason Seidl from TD Cowen. Jason Seidl: Mario, team, nice job in the quarter and sort of impressive outlook here. A couple of questions. Given the better trends that you're seeing in terms of the demand side, and if we extrapolate them for 3Q and 4Q, where are you guys going to exit the year in terms of available capacity? And also, how should we look at head count given these better trends? . Mario Harik: Great question, Jason. So if you look -- if we first look at it on the capacity side for doors and equipment, I'll start with rolling stock. We're feeling great for rolling stock. I mean if you think about it, we've added more than 30% more trailers, more than 20% more tractors, and that's going to give us the runway for the next few years as we continue to invest in our fleet to be able to handle any demand environment. A similar dynamic for the door side. And usually, in a down cycle as an LTL carrier, having in excess of 30% door capacity is very helpful because that enables you to be able to take on more volume when the up cycle comes and you can support both your existing customers as well as gain profitable market share gains. And we're feeling great about where we are on that portion of it as well. And not all capacity, Jason, is created equal because you can imagine as a network business, you could have certain markets where you are short on capacity. And this is where we have done our investments. A lot of the investments we've done, whether it's in the South or the Southeast or the Southwest, were all driven in areas where historically we had capacity constraints, and now we are actually feeling great about where we are. If you look at a market like Nashville or Atlanta or in Texas or in the Midwest, I mean, we've done a really good job in complementing our network and adding those mega facilities in those very large markets to be able to support our customers in the context of an up cycle. On the labor side, on the headcount side, we feel very good about where we are right now. From our perspective, we continue to improve productivity, as I mentioned earlier, and that gives us an incremental amount of labor capacity where you can do more with the existing headcount that you have. Now if you look at over the last few years, we are only down slightly on headcount. So relative to where we were in the month of July, we can handle another low to mid-single digit more shipments with the existing workforce and by ramping up hours back up. But we've also been proactive in hiring as well based on what we're hearing from customers and what we're seeing in the demand environment. In some markets, we've already ramped up our hiring efforts, and we're seeing very, very good traction so far. Now if the industry demand recovery accelerates further from here and we see a hockey stick type demand recovery, we're also confident in our ability to further expand the workforce. As you know, our employee turnover is the best it's ever been, and we can spin up more than 130 driver training schools to help support our growth there as well. So on all aspects of capacity, we're feeling great. We're going to be right there to support our customers and grow with them in the context of a demand recovery. Operator: The next question is from Jordan Alliger from Goldman Sachs. Jordan Alliger: So it's been a while since weight per shipment, I think, got back to flat or positive. I'm just curious if you could give some thoughts from here. Is your expectation that, that will move into the positive at this point in time? And then just real quickly on just a price follow-up. If we do have that broadening industrial recovery that we're hoping for, given you're already seeing very strong pricing, can price be pushed up even further from here? Ali-Ahmad Faghri: Sure, Jordan. I'll start on weight per shipment and then pass it to Mario to talk about the pricing outlook. From a weight per shipment standpoint, we are seeing encouraging trends. Here in the second quarter, our weight per shipment improved by about 1 point on a year-over-year basis relative to the first quarter, also outperformed seasonality as we move from Q1 into Q2. Now here more recently, we've seen weight per shipment improve even further in the month of July, weight per shipment was flat on a year-over-year basis. That was also better than typical seasonality relative to July, and it's ultimately being driven by that improvement in the underlying industrial demand backdrop that Mario referenced earlier. If you just roll forward what we've been seeing here more recently, it would put weight per shipment down year-over-year in the third quarter. That does factor in a tougher comp that we had in the month of August, which subsequently gets easier in September. However, we do expect weight per shipment to be down less year-over-year in Q3 versus Q2. as you cycle into the fourth quarter, we do see a scenario where weight per shipment starts to inflect positive on a year-over-year basis entering 2027. Ultimately, that's going to be driven by the demand environment and how much further it improves from here. But we do expect weight per shipment to start to inflect positive on a sustainable basis over the next few months and as we enter the ending of the year. Mario Harik: And Jordan, when you look at the industry pricing overall, we are starting to see a more constructive industry pricing environment. As I mentioned earlier, you have a dynamic where you have demand in the early innings of picking up and then you have capacity that has gone out of the market. So we do believe that you're going to see an industry overall pricing recover over the quarters and years to come. Now the way we think about it, I mentioned earlier on the runway that we have above market to grow our yield performance, which is, call it, 2 to 3 points of outperformance between a premium on service, premium services and growing to small and medium-sized customers. Now in a soft macro environment, and as you know, we've been in a freight recession for 3-plus years, you see typically LTL pricing be up in that low single digit. And our expectation is that we will outperform that by 2 to 3 points on a consistent basis. As the environment starts picking up, you will see industry pricing go up mid-single digit, then we'd expect to outperform that. And then eventually, when the industry pricing gets up to mid- to high single digits in a full-blown recovery, we'd expect to outperform that by a few points there as well. So that's how we think about the trend. And we believe we are currently in the early innings of what would be a multiyear recovery with industry pricing going up, demand going up, being constrained by capacity for the players who haven't invested in growing capacity. Operator: The next question is from Chris Wetherbee from Wells Fargo. Christian Wetherbee: I wanted to ask about productivity. So you outperformed productivity target again in the second quarter, and you've done that a number of the last several quarters. I guess as we think forward, what I guess seems to be different is the fact that tonnage is inflecting more positively here, so you're able to get the productivity without the help of volume. I'd imagine productivity is probably a bit easier as we go with the volume growth. But maybe you could help sort of lay out what you think maybe is the right way to think about productivity. Is it still sort of 1.5 points on a year-over-year basis? Do you think it can be better kind of in a more favorable demand backdrop? Mario Harik: Well, overall, you're spot on that, Chris, whenever you see higher volumes, you tend to be more productive because you have more density in your network. As I said, these things are not linear in terms of how you improve that over time. And for us, our target is 1.5 points call it, over the next number of years based on all the solutions that we are deploying our AI capabilities and what we're doing. But we have been outperforming that number. When you look at the post-Yellow bankruptcy and you saw an uptick in overall freight volumes above seasonal trends, we also were able to improve productivity meaningfully higher over that period of time. But again, it's not linear. Our expectation is 1.5 points a quarter. And if you zoom out and you look on a multiyear trajectory, we do expect to outperform that as well, given our proprietary technology firing on all cylinders, but also obviously, field execution being very disciplined in how we're executing in the field. Operator: The next question is from Tom Wadewitz from UBS. Thomas Wadewitz: I wanted to see if you could offer a little bit of a thought on how inflation may affect the business. Obviously, you're seeing good price, good tonnage, great operating leverage. But how do you think about where maybe there is some inflationary pressures? And I guess I'm thinking comp and benefits in particular, that's your big expense line and maybe how that affected in 2Q and how you look forward with that. Also, I guess, related to that is just in the driver market. I think we've heard some feedback that some of the tightening in LTL aside from -- is maybe not terminal driven, but more so drivers getting a little tight. I don't know if you see that or if that's a factor in terms of how you look at inflation. Ali-Ahmad Faghri: Sure, Tom. So if you think about inflation, I think overall inflation, we see in the mid-single-digit range. And I think you're right. I think the core of that really is the wage inflation you would expect to see. And I think beyond that, I think more broadly, you'll see a point or 2 from particular health insurance, as you would expect. I think if you look at where we see that, we'll see that certainly on the SWB line we see in the second quarter. So we saw some inflationary pressure there this quarter. I think beyond that, obviously, something like higher volume shipments will play a factor there. We also did have some incentive comp. But I think the important point there is really the productivity. And Mario already spoke to productivity, but having 2.5 points of productivity in the quarter really helped us manage that. So when you think about the core inflationary pressure really being on labor, we're always going to look to manage labor and ensure labor is adjusted to the freight we have on the dock. And I think we've been effective in doing that, which you can see in the results. Mario Harik: And in terms of driver -- go ahead, Tom. Thomas Wadewitz: I was just going to say, like on the -- you mentioned some of the incentive comp or other pressure in 2Q. Is that -- like would we expect to see that 3Q looking forward as well? Or is some of that temporary 2Q. Ali-Ahmad Faghri: I think from what you'll see as far as the components that will impact us in the back half, I think you'll see some of the similar components. So certainly, the wage and benefit inflation will be there. The higher incentive comp will be there as well. I think the important point, though, that's contemplated in our outlook for the back half of the year. When you think about the overall OR for the year improved by more than 200 basis points, we're already taking that into consideration. Mario Harik: In terms of the driver market, Tom, so we are seeing the hiring market tighten. And we believe it's a component of that is what's happening in the truckload space where you have capacity that's going out. So you have a lot of the larger fleets and the larger carriers who are now hiring drivers as well. As I said, we -- given our benefits and comp packages for our drivers and given the fact that we have a very young fleet, I mean, our average truck age is sub-4 years. We've been very successful being able to add drivers in some markets where we needed to, and we have seen very good traction there as well. But the market is tightening on hiring as well. Operator: The next question is from Brian Ossenbeck from JPMorgan. Brian Ossenbeck: Maybe just real quick, first, commentary on fuel. Obviously, still swinging around a little bit, probably still a little impact on the current quarter and how you think about that in the outlook? And then just more broadly, maybe for Mario, can you just talk about the -- the mix seems to be shifting a little bit just based on the weight per shipment trends inflecting more positive. Can you just talk more about the 3PL layer, I guess, or that part of the structure? Because it seems like others are having problems with that in terms of their pricing. It looks like you're getting more industrial flow-through than maybe some other companies we've heard of so far. So I want to see if there's anything you can point to in terms of why there's a relative difference with some of your peers to the extent you have visibility on that? Ali-Ahmad Faghri: Sure, Brian. This is Ali. On the fuel side, when you look at our second quarter performance and our ability to outperform seasonality and deliver that 300 basis points of year-over-year improvement really goes back to the strong operational execution that we're delivering tied to our accelerating pricing, the profitable market share gains, the above productivity target that we're delivering. Now certainly, fuel helps. But I think if you zoom out and you look at over the last 3 years, we've delivered nearly 800 basis points of OR improvement in an environment where fuel was down for the majority of that period. And again, I think that speaks to the strong underlying operational execution that we're delivering. Here in the third quarter, based on what we're seeing with diesel prices, we do expect diesel prices to be down quarter-over-quarter and subsequently for our fuel revenue to also be down on a quarter-over-quarter basis. Even with fuel down quarter-over-quarter, we would expect to meaningfully outperform normal seasonality here in the third quarter and for the full year and deliver very strong performance. Now on the 3PL side, transactional 3PL mix is the smallest part of our business as a whole. And typically, what you'll see, Brian, is that carriers will work more with 3PL in softer volume environments like we've been in over the last few years. But then as demand improves, you'll typically see that come lower. And that's what we see here more recently. As our volumes have accelerated through the second quarter and into the third quarter, we've seen our 3PL mix decline on a sequential basis. Overall, if you zoom out, we're focused on OR accretive freight that fits our network. Ultimately, if it checks those boxes, we're going to pursue it. So we think about that business very similar to the rest of our book. Operator: The next question is from Ari Rosa from Citigroup. Ariel Rosa: Congrats on some nice results here. Guys, I wanted to ask about the performance in Europe. It seems like it continues to improve. Just maybe if you could speak to the sustainability of that, what you're doing differently there? And then I noticed the transaction and integration costs were somewhat elevated or maybe it was restructuring costs in the quarter. Maybe just speak to what that is and if that continues. Mario Harik: You got it. I'll start and then I'll turn it over to Kyle on the restructuring side and the near-term results. But high level in Europe, we are driving a similar plan to what we drove here in the U.S. in terms of cost control, leaning into sales and hiring more salespeople, growing into new verticals. For example, we didn't used to do any work in luxury goods or aerospace or health care or [ medical ] work or technology. And all of these are now verticals that we are actively pursuing. And we are on a very, very good trajectory of growth. We -- as Kyle mentioned earlier, we grew EBITDA in that business here in the second quarter in the high-single-digit range, and we expect to grow our EBITDA in the high teens in the back half of the year. So we're seeing a very good acceleration of results driven by the execution of our plan. Now ultimately, our goal is to sell that business and -- but we're patient, we want to get the right price for it. And when the time is right, we're going to sell that business based on that very strong momentum here on operating performance. Kyle Wismans: And in terms of restructuring costs, I think the majority of the costs we saw in the quarter relate to restructuring in Europe. And what we're doing there is really taking structural costs out. That was really some efforts focused on the salary and the functional support team that's really going to help them streamline the operation moving forward. I think what's important there is you're seeing it flow through in the results. As we said, you're up 9% year-over-year growth in the second quarter, and that growth is going to accelerate in the back half of the year within the European business. It's also important to note that sales restructuring spend that we're seeing in the second quarter will step down for the remainder of the year. Operator: The next question is from Bascome Majors from Stephens Inc. Bascome Majors: You've given us a bit of a look forward with the longer-term margin target quantified and talking about the yield spread that you expect to maintain and where the market might go if it continues to remain tightened. Can you give us a big picture look at what the cash flow and incremental margin algorithm might look like for the business over the next couple of years? I know you don't want to guide demand out that far, but just with all of the changes and acceleration and productivity that we've seen today, just update us on sort of the long-term algorithm in the business? Kyle Wismans: It's Kyle. So I want to start with free cash flow, and you can talk just about this year for a second. So if you look at '26, we started the year thinking we were going to improve free cash flow by 50% on a year-over-year basis. At this point, we're far ahead of that expectation. As we said in the prepared remarks, we now expect it to at least double year-over-year, really driven by 2 major factors. So one is continued ability to drive higher income and the second is CapEx moderating. If you think on long term, how that translates, we think our EBITDA conversion is going to continue to accelerate as earnings continue to grow. And we're going to have a moderation in our CapEx profile we've seen versus the last couple of years, which really means we're going to be able to generate billions of dollars of free cash flow over the coming years with compounding earnings growth and our ability to really accelerate both our share repurchase program and our debt paydown. So we're really excited about what cash can do for us and how it translates in the future. I think from the other standpoint from an incremental margin view, I think over the cycle, we think we can generate 40% incremental margins, and we've demonstrated that so far. It's going to depend on the mix of volume and price. But I think over the long term, as Mario talked about, we expect yield to be the bigger driver of the contributor to top line growth, and that's going to have very strong flow-through the bottom line. So we also talk about our yield initiatives, whether it's growing local, whether it's growing premium or otherwise, they're really early innings for us, and there's a long runway to growth. So we expect really, really strong incremental margin forward, at least in the 40% range through the cycle. Operator: Thank you. The next question is from Bruce Chan from Stifel. J. Bruce Chan: Just want to come back to some of the comments on demand. Mario, you mentioned that part of the volume outlook is coming from market share, which I think makes a lot of sense with your service levels and your sales force investments. But any sense for how much of that volume outlook is idiosyncratic versus what's coming from the market? And maybe as part of that, any color on what you're seeing by end market would be helpful, too. . Mario Harik: You got it, Bruce. Well, first, it's coming from the combination of 3 things I mentioned earlier on. From one perspective, we are gaining market share. From one perspective, we're starting to see truckload back to LTL conversion, but that's very early innings. And we're starting to see the industrial economy further strengthen as we are heading here into the back half of the year. So these are the 3. It's tough to estimate because in any given month, you have a combination of all of these things that kind of work in your favor. And we believe currently, the bigger component is our idiosyncratic market share gain levers. But at the same time, we're seeing the other 2 starting to contribute as well. And we're currently -- I mean, if you see there is a scenario here where you see both of these levers accelerate meaningfully in the back half of the year, that's not contemplated in our outlook yet. So obviously, we'll see if that industrial economy picks up from here and you see eventually start seeing a hockey stick type on the recovery on the tonnage side, but that's not contemplated in our outlook at this point in time. Now in terms of the market share gain, just to kind of give you some color, we spoke about small to medium-sized customers. If you look at last year, we were run rating with our very strong growth in that segment of business, we're roughly run rating at about 2,500 new logos, new customers a quarter in that particular channel. And here in the second quarter, we were at 2,700 to 2,800 customers that we have added. So a step up from where we were at the run rate of last year. Similarly, on premium services, I'm very proud of the team driving those on the sales side and the operations side to execute on them because we're seeing very strong momentum in those services as well that are contributing to our tonnage growth. In terms of end markets that we are seeing growth in, so high level, I'd say retail so far this year has been consistently positive, but modestly positive. But still the consumer is in a healthy place. We're still seeing that demand be in a good place overall. When I look at the industrial side, last quarter, we spoke about electrical being strong, chemical or industrial for chemical industry being strong, equipment for agriculture being strong, heavy equipment being strong. And now what we have seen here in the second quarter, especially as we progress through the quarter, is manufacturing is starting to build its momentum as well. And if that continues because that's one of the largest parts of the industrial cycle or industrial complex, we could see, obviously, things further improve in the back half of the year from an overall demand perspective. But generally, optimism on customers is higher. Demand is starting to pick up. Again, it's early innings. So there is a scenario here if we continue to see that ISM plays into higher industrial freight, where we see a stronger recovery even in the back half on the tonnage side. Operator: The next question is from Ravi Shanker from Morgan Stanley Investment Management. Ravi Shanker: Just a couple of follow-ups. Mario, I think you said you're going to have a double-digit pricing opportunity in the next 5 years. Can you just talk about what the slope of that looks like? And maybe remind us what the expected pricing lag in terms of timing might be relative to TL? And also, I think you said that you think the network can absorb about mid-single-digit volumes here before you start bringing resources back. It sounds like you're going to get there next quarter, unless I'm misunderstanding that comment. And so can you just talk about when and how much you think that resource addition might actually start to show up? Mario Harik: You got it, Ravi. Well, first, I'll start on the pricing opportunity. We do expect it to be fairly consistent in terms of outperformance. So we don't see the slope outside of the market pricing and what that does. But in terms of our outperformance or the double-digit opportunity, we see that as being fairly steady in that 2 to 3 points higher than market average pricing is the way we expect that to roll out over the next 5-plus years. And that will be driven by the 3 levers I mentioned earlier on. So taking a bit more price given the improvement in service quality and then obviously growing more from a mix perspective with the small to medium-sized customer and the premium services. And just to quantify them, Ravi, we estimate about 1 point coming from the better service product per year on top of what the market is doing, a point would be coming from our premium services growing and us taking market share in those. And some of these, we're still very, very early innings. If you look at a market like grocery consolidation, we still have a speck of that market, but we have a fantastic pipeline and the business keeps on growing in that segment of business, just as one example of those. But we would expect that as being roughly at a run rate of an incremental point per year on the price side. And the last component is for the small- to medium-sized customers. We do expect that to be at a clip of about 0.5 point of incremental price driven by that portion of business as we continue to grow. In terms of the network absorbing more volume, so we already have started in the second quarter our hiring efforts in some ramping up hiring in some markets. And we've had great success so far, Ravi, in that. As I mentioned earlier, the benefits we offer between the -- where our network is, the equipment that we have, we've been able to grow in a very, very good way in those markets we want to hire in. And obviously, we'll see where the market goes from here. So if we start seeing double-digit type tonnage growth, obviously, we're going to lean into the markets where we need the incremental folks and kind of go from there to add the people that we need. Operator: The next question is from Christopher Kuhn from StoneX. Christopher Kuhn: I'm just curious how the newer terminals have done that you've opened in the past couple of years and how that might be benefiting your overall performance? . Mario Harik: Overall, Chris, the new terminals have been fantastic for us. And the reason why because we already operate in all of the regions where we added those terminals. So from the ones we've added, around half of them were relocations when we went from a smaller terminal to a bigger terminal and the other half were incremental adds in existing markets. But just to kind of give you an example, I always give the example of, for us, the city of Nashville, where we used to have a location southeast of the city. And we -- given the amount of freight we used to break every night in that location, we used to handle, call it, 4 million pounds of freight in our overnight shift. And we didn't have enough door capacity or yard capacity to manage through that. So since then, we used to also, every day, dispatch about 35 drivers to go up north of the city of Nashville, up an hour north to get to Goodlettsville. So since then, we opened up a break bulk location west of Nashville, 250 doors, 50 acres of land, one of the largest terminal in the city of Nashville, and that enabled us to expand capacity, improve line haul efficiency. And then the new location in Goodlettsville enabled us to improve our P&D efficiency. So what we have seen is a step-up in both pickup and delivery and line haul efficiency in the markets where we opened up these locations in while giving us the runway to be able to handle much more customer freight in these markets where we needed it. So what we have seen so far a very quick ramp on productivity and improving of the operational performance from a cost standpoint, but also enabling us to handle more freight for the customers as well. We've executed on those in a very, very strong way. Operator: The next question is from Eric Morgan from Barclays. Eric Morgan: Maybe just a couple of quick ones. On line haul in-sourcing, I think your slides showed a slight uptick sequentially. I realize it's small, so maybe just noise, but curious if there's anything to call out there and where you might see that going from here? And on Europe, just given the momentum in that business, any update or progress on strategic alternatives that you'd call out? Mario Harik: Yes. I'll start on the European side. But as I mentioned earlier, our goal, Eric, is to eventually sell that business, but we are patient on the price we want to get. Now if you look at the capital markets in Europe and generally the economy in Europe, although our business is outperforming meaningfully what we're seeing in the market, that's not the case in Europe. So in Europe, overall, the economy, I would say, is flattish, slightly slow. But through execution, gaining market share, leaning on price, as I mentioned, leaning on cost control and efficiency, we have been able to outperform the market here. But at some point, when we get the right price for it, we're going to sell that business, and we're going to use the proceeds to further accelerate our capital return to shareholders is how we think about it overall. Eric Morgan: And then just quickly on the line haul miles. So our outsourced miles were in the mid-single-digit percentage range of total miles. That's actually the lowest level we've had in our company history. And if you look forward for the remainder of the year, it's a level we expect to be at for the rest of '26. We're in a great spot there. I think it really reflects what we've been able to do to insulate the P&L from any concern on truckload rates moving forward. So we feel like we're in a really good spot there for the remainder of the year. Operator: There are no further questions at this time. I would like to turn the floor back over to Mario Harik for closing comments. Mario Harik: Thank you, operator, and thank you, everyone, for joining us today. As you saw, our strategy has delivered another quarter of strong results, driving outsized value creation. And looking forward, we'll continue to grow the business, expand our margins and deliver higher free cash flow for years to come. With that, I'll ask the operator to please end the call. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. Before you buy stock in XPO, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and XPO wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends XPO. The Motley Fool has a disclosure policy. XPO (XPO) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

XPO (XPO) came out with quarterly earnings of $1.7 per share, beating the Zacks Consensus Estimate of $1.49 per share. This compares to earnings of $1.05 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +14.09%. A quarter ago, it was expected that this freight management company would post earnings of $0.89 per share when it actually produced earnings of $1.01, delivering a surprise of +13.48%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. XPO, which belongs to the Zacks Transportation - Truck industry, posted revenues of $2.36 billion for the quarter ended June 2026, surpassing the Zacks Consensus Estimate by 3.23%. This compares to year-ago revenues of $2.08 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. XPO shares have added about 46.7% since the beginning of the year versus the S&P 500's gain of 6.9%. While XPO has outperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for XPO was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.35 on $2.27 billion in revenues for the coming quarter and $4.91 on $8.81 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Transportation - Truck is currently in the top 2% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Forward Air (FWRD), has yet to report results for the quarter ended June 2026. The results are expected to be released on August 5. This contractor for the air cargo industry is expected to post quarterly loss of $0.17 per share in its upcoming report, which represents a year-over-year change of +58.5%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Forward Air's revenues are expected to be $632 million, up 2.1% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report XPO, Inc. (XPO) : Free Stock Analysis Report Forward Air Corporation (FWRD) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

XPO blew past analysts’ expectations for the second quarter. A better freight mix and numerous AI-fueled efficiency initiatives produced record operating results in its less-than-truckload unit. The Greenwich, Connecticut-based company said the industry is still in the “early innings” of a multiyear double-digit rate growth cycle. XPO expects to capture rate increases that outpace competitors by two to three percentage points given the investments it has made to its service offering. It’s adding more freight from SMBs and shipments that incur accessorial charges, which are also driving the outperformance. XPO (NYSE: XPO) reported second-quarter adjusted earnings per share of $1.70, which was 23 cents ahead of the consensus estimate and 65 cents higher year over year. The adjusted EPS number excluded transaction and restructuring costs among other items. It included a 6-cent tailwind from gains on real estate sales. Consolidated revenue of $2.36 billion was 13% higher y/y and $85 million better than expectations. Less-than-truckload revenue increased 15% y/y to $1.43 billion. Revenue was 5% higher excluding fuel surcharges. (Diesel prices were roughly 50% higher y/y in the quarter.) Tonnage increased 1% y/y with yield up 14% (4% higher excluding fuel surcharges). A 3% increase in daily shipments and a 2% decline in weight per shipment formed the tonnage increase. A 1% increase in length of haul along with the lighter shipment weights were tailwinds to the yield calculation (revenue per hundredweight) in the quarter. Tonnage trends improved throughout the quarter as it is seeing “a lot of positivity from customers.” On a y/y comparison, tonnage was down 1.5% in April, up 0.5% in May and 4% higher in June. July tonnage is up more than 6%. Daily tonnage was up 4.5% from the first to the second quarter. Better-than-normal seasonality is expected to drive volumes up by a mid-single-digit percentage y/y in the third quarter. XPO has been taking market share among local accounts (SMBs), which typically have lighter shipments but produce better margins. Both yield and revenue per shipment (excluding fuel) improved y/y and sequentially, which was in line with management’s guidance. The LTL unit recorded a 79.9% adjusted operating ratio (inverse of operating margin), which was 300 basis points better y/y and 400 bps better than the first quarter. The result was 100 bps better than management’s guidance. Revenue per shipment outpaced adjusted cost per shipment by nearly 400 bps in the quarter. The carrier normally sees 200 to 250 bps of OR degradation from the second to the third quarter, implying a third-quarter result “north of 82%.” However, better pricing and the other idiosyncratic initiatives are expected to produce an adjusted OR below 81% in the period. It raised its full-year margin expectation from 100 to 150 bps of y/y improvement to “at least 200 bps” of improvement. It now sees a path to annual ORs in the low-70s, “or better,” longer term. It has improved the OR roughly 800 bps through the downturn. XPO’s European transportation segment reported a 10% y/y increase in revenue to $927 million. Adjusted EBITDA of $48 million was 9% higher y/y. It has added sales associates to grow into select verticals while removing some structural costs. It still plans to sell the unit to make XPO a true pure-play LTL company. Shares of XPO were off 0.2% at 12:59 p.m. EDT on Thursday compared to the S&P 500, which was up 1.3%. The stock is up 43% year-to-date. Why it matters? XPO is one of a few publicly traded LTL carriers. Its quarterly results provide insight into a subsegment of trucking where few public datasets exist. More FreightWaves articles by Todd Maiden: ArcBest’s Q2 a step on path to recovery Regulatory cleanup fuels Knight-Swift’s bullish outlook Forward Air secures deal to keep at least 50% of $250M account The post XPO’s Q2 earnings beat expectations behind strong LTL performance appeared first on FreightWaves.