Portfolio in Brief—XPO (XPO)
XPO is a major transportation and logistics company in NorthAmerica. The company is best known for its less-than-truckload, or LTL, network—asegment where shipments from multiple customers are consolidated within thesame network of trucks and terminals, rather than using a full truck for asingle shipment.
This is a highly operational business. The differencebetween a strong company and an average one often comes down to execution:network density, service quality, cost control, terminal productivity, pricingdiscipline and the ability to deliver consistently with minimal errors.
The company is also investing more heavily in technology,data and artificial intelligence to optimize routes, manage capacity moreefficiently and reduce claims. In a business like transportation, theseoperational gains can have a meaningful impact on profitability.
Highlights from the Latest Quarter
- Revenue of US$2.10 billion, up roughly 7% year over year.
- Adjusted diluted earnings per share of US$1.01, compared with US$0.73 last year, an increase of about 38%.
- Adjusted EBITDA of US$319 million, up approximately 15%.
- Adjusted EBITDA margin of 15.2%, up 100 basis points.
- North American LTL revenue of US$1.23 billion, up 5%.
- LTL adjusted EBITDA of US$290 million, up 16%.
- LTL adjusted EBITDA margin of 23.6%, an improvement of 230 basis points.
- LTL adjusted operating ratio of 83.9%, an improvement of 200 basis points year over year. In transportation, a lower operating ratio is positive: it means the company is keeping a larger share of its revenue as profit.
- Operating cash flow of US$183 million, giving the company more flexibility to invest in its network, reduce debt and repurchase shares.
Why This Stock Is Worth Watching
XPO offers direct exposure to a potential recovery in theNorth American industrial economy. After several difficult years for freighttransportation, early signs of stabilization are beginning to appear. Ifvolumes recover, XPO could benefit from a combination of stronger volumes,better pricing and already-improved profitability.
The LTL segment remains especially attractive. This is amarket where strong operators can create significant value through a densenetwork, high service quality and consistent execution. XPO also has excesscapacity in its network, which could allow the company to absorb more volumewithout materially increasing fixed costs in the near term.
Management is targeting further improvement in the operatingratio in 2026. Over the longer term, the goal is to bring that ratio below 80%.If the company continues moving in that direction, it could support earningsgrowth and further improve the quality of the business model.
Risks to Watch
XPO remains a cyclical stock. If the economy slows, ifindustrial volumes remain weak or if the freight market takes longer torecover, revenue growth could be more limited.
Competition is also an important factor. The LTL sectorincludes several strong players, including Old Dominion and Saia, whichcontinue to invest in their networks. XPO will need to maintain pricingdiscipline and continue improving service quality to protect margins.
Valuation also requires discipline. The stock has alreadymoved up significantly, so the market is pricing in a good portion of theimprovement. For the stock to continue performing well, XPO will need todeliver several strong quarters and show that operating ratio improvement cancontinue.
Conclusion
For us, XPO brings a different type of exposure to theportfolios: less tied to large technology mega-caps, and more directly exposedto a potential improvement in the North American industrial economy. If freightvolumes gradually recover, a company that is already more efficient can benefitfrom meaningful operating leverage.
What is particularly interesting is that we bought the stockbefore the market fully recognized this improvement. The stock had already beenstrong, but the first-quarter results helped confirm that the move was notsimply based on enthusiasm. At the time of the results, XPO was already upabout 59% year to date and more than 120% over 12 months. After the results,the market continued to reassess the story, supported by a 38% increase inadjusted earnings per share, a 200-basis-point improvement in the LTL operatingratio and a 15% increase in adjusted EBITDA.
This is exactly the type of situation we like to identify: acyclical company that is becoming a better business, improving margins beforethe cycle has fully recovered. XPO is not without risk, and the valuation nowrequires more discipline. But the numbers point to a company that is moreefficient, more profitable and better positioned to benefit from a recovery inNorth American transportation.
In short, XPO adds meaningful diversification to theportfolios. It is not a technology mega-cap, but it is a high-qualityindustrial stock, with a management team executing well, margins moving in theright direction and attractive operating leverage if the freight marketcontinues to stabilize.
Markets in Brief
Monday
Dow Jones: 48,941.90 (-1.13%)
S&P 500:7,200.75 (-0.41%)
Nasdaq: 25,067.80 (-0.19%)
S&P/TSX: 33,638.87 (-0.74%)
Canadian Dollar
The Canadian dollar traded at an average rate of 73.47 UScents, down from 73.66 US cents on Friday. The loonie was pressuredby a more cautious tone across markets, even though the sharp increase in oilprices would normally have provided some support to the Canadian currency.
Wall Street started the week lower as renewed tensions inthe Middle East triggered a wave of selling in a market that had just reachednew highs. After a strong recent advance, investors used the rise ingeopolitical risk as an opportunity to reduce equity exposure, particularlygiven that short-term valuations had become more demanding.
The main source of pressure was oil. Attacks targeting theUnited Arab Emirates, tensions surrounding navigation through the Strait ofHormuz and conflicting reports about maritime security revived concerns overpotential disruptions to global energy supply. WTI crude jumped 4.39% to US$106.42per barrel, while Brent advanced 5.8% to US$114.44. This sharp move supportedenergy stocks, but it also renewed concerns around inflation, transportationcosts and corporate margins.
Bond yields also reacted. The U.S. 10-year Treasuryyield rose to around 4.44%, compared with 4.37% on Friday, while the 30-yearyield reached roughly 5.02%, its highest level since last summer. This rise inyields weighed on risk appetite, especially in a market already closelywatching the Federal Reserve’s policy path.
The earnings season remains a source of support. More than 80%of S&P 500 companies that have reported so far have exceededexpectations. Investors therefore continue to recognize the strength ofcorporate earnings, but Monday’s session was a reminder that external risks—oil,inflation, interest rates and geopolitics—can quickly regain the market’sattention.
In Canada, the TSX declined 0.74%, weighed down in part byweakness in the consumer discretionary sector. Although higher oil pricessupported some energy names, the broader cautious tone across North Americadominated the session.
Stocks in Brief
- UPS (UPS): -10.47% — The stock fell sharply after Amazon announced the launch of a logistics services offering independent from its e-commerce platform. Investors are concerned about increased pressure on traditional transportation and delivery companies.
- FedEx (FDX): -9.11%—The stock also came under pressure following Amazon’s announcement. Investors reassessed the competitive risk in a sector already sensitive to economic volumes, fuel costs and margins.
- GXO Logistics (GXO): -17.70%—The stock posted a steep decline and was among the most affected by Amazon’s new logistics ambitions. The move reflects concerns over potentially more direct competition in supply chain services.
- XPO (XPO): -7.12% — The stock declined alongside the broader logistics sector, as investors anticipated increased pressure on pricing and market share.
- Amazon (AMZN): +1.35% — The stock advanced after the company announced the launch of logistics services for businesses. This initiative could open a new revenue stream and further strengthen Amazon’s vertical integration.
- eBay (EBAY): +5.05% — The stock rose after receiving an unsolicited takeover proposal from GameStop, valued at just over US$55 billion. The company said it would carefully review the offer, although the market remains cautious about the likelihood of a completed transaction.
- GameStop (GME): -10.14%—The stock dropped after announcing its bid for eBay. Investors appeared skeptical about the company’s ability to finance and execute a transaction of that scale.
- Energy — The sector was one of the few areas to hold up against the broader market decline, supported by the sharp rise in crude prices. Stocks such as APA, Diamondback Energy and Marathon Petroleum benefited from the move.
Tuesday
Dow Jones: 49,298.25 (+0.73%)
S&P 500:7,259.22 (+0.81%) — new closing high
Nasdaq: 25,326.13 (+1.03%)—new closing high
S&P/TSX: 33,566.91 (-0.21%)
Canadian Dollar
The Canadian dollar held around 73.4 US cents,relatively stable compared with the previous session. The loonie did not fullybenefit from the rebound in risk appetite, mainly because oil prices pulledback after Monday sharp increase.
Wall Street rebounded Tuesday, supported by a pullback inoil prices and the continuation of a very strong corporate earnings season. TheS&P 500 and the Nasdaq both reached new closing highs, showing thatinvestors remain willing to move back into risk assets when geopoliticalpressure eases.
The main shift from Monday came from oil. After the sharpmove higher tied to tensions in the Middle East, crude prices fell by roughly 4%,as investors reacted positively to the passage of two commercial ships throughthe Strait of Hormuz. This development reduced, at least temporarily, concernsover a major disruption to maritime transport and global energy supply.
Lower oil prices also helped calm the bond market. The U.S. 10-yearTreasury yield moved to around 4.42%, slightly below Monday’s 4.44% level. Thedecline was modest, but it was enough to support growth stocks, particularly intechnology, where risk appetite remains elevated.
The geopolitical backdrop remains fragile. The ceasefirebetween the United States and Iran is still holding, but investors continue tomonitor the Strait of Hormuz closely. The fact that commercial ships were ableto pass through safely reinforced the idea that the shipping lane couldgradually stabilize.
Corporate earnings remain the other major support for themarket. Roughly 85% of S&P 500 companies that have reported results sofar have exceeded expectations. This level of positive earnings surprises helpsexplain the resilience of the indices despite risks tied to oil, interest ratesand geopolitics.
Economic data delivered a more mixed picture. U.S. servicesactivity slowed in April, while remaining in expansion territory. The ISMservices index came in at 53.6, below expectations but still above the 50threshold. Job openings in the JOLTS report were relatively stable at 6.87 million,slightly above expectations, while hiring improved. Investors are now focusedon Friday’s official employment report, which could influence expectations forthe Federal Reserve’s next decision.
In Canada, the TSX finished down 0.21% at 33,566.91 points.Lower oil prices weighed on some energy-related components, while the Canadianmarket did not benefit from the same degree of optimism seen on Wall Street.
Stocks in Brief
- Shopify (SHOP): -15%—The stock fell sharply after the company issued guidance that investors viewed as disappointing for the current quarter. The market focused on the expected slowdown in growth, which weighed on the stock despite the long-term quality of the business model.
- Pinterest (PINS): +6.86% — The stock advanced after better-than-expected results and revenue guidance above expectations for the current quarter. Investors welcomed the company’s ability to maintain a growth trajectory in a more selective advertising environment.
- DuPont de Nemours (DD): +8% — The stock jumped after quarterly results came in above expectations. The report reinforced the view that earnings strength extends beyond the largest technology companies.
- Anheuser-Busch InBev (BUD): +8%—U.S.-listed shares of the brewer rose sharply after stronger-than-expected results. Earnings and revenue both exceeded expectations, supporting the stock in a session that rewarded companies delivering solid results.
- Palantir Technologies (PLTR): -7%—The stock declined despite results above expectations and an upward revision to full-year guidance. Investors appeared to take profits after a strong recent run in a stock already highly valued and closely tied to the artificial intelligence theme.
- PayPal (PYPL): higher — The stock was supported by better-than-expected quarterly results. The company reported adjusted earnings of US$1.34 per share and revenue of US$8.35 billion, both above analyst expectations.
- Pfizer (PFE): higher — The stock gained after stronger-than-expected results. The company reported adjusted earnings of US$0.75 per share on revenue of US$14.45 billion, ahead of market expectations.
- GameStop (GME): under pressure — The stock remained in focus after the unsolicited takeover offer for eBay announced the previous day. Michael Burry said he had sold his entire GameStop position, arguing that the potential leverage tied to a transaction of this scale changed the investment thesis.
- Energy—After outperforming on Monday, the sector lost some support as oil prices declined. WTI crude ended at US$102.27 per barrel, down 3.9%, while Brent closed at US$109.87, down 3.99%.
Wednesday
Dow Jones: 49,910.59 (+1.24%)
S&P 500:7,365.12 (+1.46%) — new closing high
Nasdaq: 25,838.94 (+2.02%)—new closing high
S&P/TSX: 33,987.82 (+1.25%)
Canadian Dollar
The Canadian dollar traded around 73.5 US cents, slightlyhigher than the previous session. The loonie benefited from renewed riskappetite, but its advance remained limited by the sharp decline in oil prices,which reduced the usual support associated with commodities.
Wall Street extended its gains on Wednesday, supported bygrowing hopes that negotiations between the United States and Iran couldresume. Investors reacted positively to reports suggesting that a frameworkagreement could be under discussion to end the conflict and gradually reopenthe Strait of Hormuz.
This improvement in the geopolitical backdrop had animmediate impact on markets. Oil prices fell sharply, easing concerns aroundenergy inflation and providing renewed support for equities. WTI crude dropped 7.03%to US$95.08 per barrel, while Brent declined 7.83% to US$101.27. After severalsessions dominated by concerns over a major disruption to global supply, thispullback was viewed as a positive development for consumers, businesses andcentral banks.
The bond market also reacted favourably. The U.S. 10-yearTreasury yield eased to around 4.35%, compared with approximately 4.42% theprevious day. This decline in yields supported growth stocks, particularlytechnology and semiconductors. In a market still highly sensitive to theFederal Reserve’s policy path, lower oil prices and lower yields helped improveshort-term financial conditions.
Artificial intelligence was the other major driver of thesession. AMD’s results revived enthusiasm for semiconductors, data centres andthe broader technology infrastructure tied to AI. After several weeks ofquestions around the scale of AI-related capital spending, investors rewardedcompanies able to demonstrate real revenue growth and stronger forwardguidance.
Economic data also contributed to the more constructivetone. The ADP report showed that U.S. private-sector employers added 109,000jobs in April, above expectations. This suggests that the labour market remainsrelatively stable without appearing excessively strong. Investors are nowfocused on Friday’s official employment report, which could influenceexpectations for the Federal Reserve’s next decision.
In Canada, the TSX rebounded strongly, gaining more than 400points. The advance was supported by the return of risk appetite, strength intechnology stocks and better performance from cyclical sectors. Although loweroil prices weighed on energy, the Canadian market still benefited from the moreconstructive global tone.
Stocks in Brief
- Advanced Micro Devices (AMD): +18.64% — The stock surged after the company reported better-than-expected quarterly results and issued strong guidance for the current quarter. AMD posted first-quarter revenue of US$10.3 billion, above expectations, and now expects approximately US$11.2 billion in second-quarter revenue. Investors responded positively to the strength of demand tied to artificial intelligence and data centres.
- Nvidia (NVDA): +5.87% — The stock benefited from renewed enthusiasm for semiconductors following AMD’s results. Nvidia remains central to the AI investment thesis, particularly in graphics processors, advanced computing infrastructure and data centre acceleration.
- Micron (MU): +4.17% — The memory chip maker advanced alongside the broader semiconductor sector. Demand tied to data centres, artificial intelligence and high-performance storage continues to support investor interest.
- Intel (INTC): +4.50% — The stock rose with the broader chip sector. The session reflected renewed confidence in certain semiconductor names, especially as demand tied to artificial intelligence remains robust.
- VanEck Semiconductor ETF (SMH): +5% — The semiconductor ETF advanced sharply, supported by AMD, Nvidia and several other companies tied to technology infrastructure. The move confirmed that AI remains one of the market’s main growth drivers.
- Disney (DIS): +7.47% — The stock jumped after the company reported better-than-expected results for the second quarter of its fiscal year. Growth in streaming and the resilience of its parks and entertainment businesses reassured investors.
- Uber (UBER): +8.41% — The stock advanced strongly on encouraging guidance for the current quarter. Even though first-quarter revenue came in below expectations, the outlook was enough to support investor confidence.
- CVS Health (CVS): +7.65% — The stock gained after stronger-than-expected results. In a session marked by renewed risk appetite, investors also rewarded companies delivering solid performance in more defensive sectors.
- Corning (GLW): sharply higher — The stock rallied after announcing a partnership with Nvidia for new advanced manufacturing facilities dedicated to optical technologies. Investors viewed the announcement as another example of rising infrastructure demand linked to artificial intelligence.
- Energy — The sector came under pressure as oil prices fell sharply. After benefiting from the earlier surge in crude prices, energy stocks declined as investors reduced the geopolitical risk premium.
Thursday
Dow Jones: 49,596.97 (-0.63%)
S&P 500: 7,337.11 (-0.38%)
Nasdaq: 25,806.20 (-0.13%)
S&P/TSX: 33,856.62 (-0.37%)
Canadian Dollar
The Canadian dollar traded at an average rate of 73.34 UScents, slightly lower than 73.39 US cents on Wednesday. The looniewas pressured by lower oil prices and a more cautious tone across markets.
Markets finished lower on Thursday after Wednesday’s strongrally. The move looked mostly like profit-taking, as investors had reactedstrongly the previous day to hopes of a potential agreement between the UnitedStates and Iran. With no official confirmation yet, some caution returned tothe market.
Oil remained at the centre of attention. WTI crude ended at US$94.81per barrel, down 0.28%, while Brent closed at US$100.06, down 1.19%. Asustained decline in crude prices would be positive for inflation andconsumers, but investors are still waiting for concrete progress in thenegotiations.
Economic data also painted a mixed picture. Jobless claimsrose less than expected, showing that the labour market remains relativelyresilient. However, productivity disappointed, while unit labour costs remainelevated. Investors will therefore be closely watching Friday’s employmentreports in both the United States and Canada.
Stocks in Brief
- Fortinet (FTNT): +20% — The stock jumped after the company raised its full-year billings guidance. Demand for cybersecurity remains solid.
- Peloton (PTON): +9% — The stock rose after quarterly revenue came in above expectations, supported by better subscription revenue.
- Datadog (DDOG): +28% — The stock surged after stronger-than-expected results and revenue guidance above market expectations.
- Planet Fitness (PLNT): -33% — The stock dropped sharply after the company lowered its full-year earnings outlook.
- Vital Farms (VITL): -20% — The stock declined after a surprise first-quarter loss and a reduction in full-year guidance.
- Amazon (AMZN): lower — The stock weighed on the S&P 500 during a session of profit-taking among some mega-cap names.
- Broadcom (AVGO): lower — The stock declined alongside several semiconductor names after their recent AI-driven rally.
- Micron Technology (MU): lower — The stock also weighed on the Nasdaq as chip stocks consolidated after recent gains.
- Apple (AAPL): flat to slightly lower — The stock touched a new all-time intraday high before finishing nearly unchanged.
- McDonald’s (MCD): higher — The stock rose after better-than-expected results, confirming the resilience of its business model.
- Shake Shack (SHAK): -17% — The stock fell after weaker-than-expected quarterly results and an operating loss.
- Whirlpool (WHR): -18% — The stock dropped sharply after the company cut its full-year guidance, citing weaker demand in appliances.
Friday — Early Session
Dow Jones: +0.2%
S&P 500: +0.7% — new intraday high
Nasdaq: +1.1% — new intraday high
Weekly Conclusion
The week was dominated by oil, U.S.–Iran tensions, corporateearnings and the continued strength of stocks tied to artificial intelligence.After a difficult session on Monday, driven by higher oil prices and renewedgeopolitical concerns in the Middle East, markets quickly regained momentum asinvestors began pricing in the possibility of diplomatic progress.
The pullback in oil was a key factor. After climbing sharplyat the start of the week, crude prices moved lower, easing concerns about arenewed inflation shock. This helped support growth stocks, particularlytechnology and semiconductors.
The performance of the major indices was also notable. The S&P 500and the Nasdaq reached new closing highs on Tuesday and Wednesday, beforetouching fresh intraday highs again on Friday morning. The S&P 500 wason track for a weekly gain of about 2% and a sixth consecutive winning week,while the Nasdaq was heading toward a weekly gain of roughly 3%, supported bystrength in semiconductors and artificial intelligence. The Dow Jones, which ismore defensive in nature, was showing a more modest weekly advance of around 0.7%.
Corporate earnings continued to support the market.Investors rewarded companies able to deliver real growth, solid margins andstrong guidance. The artificial intelligence theme remains very much in place,with strong demand for semiconductors, memory, data centres and digitalinfrastructure.
Friday’s U.S. employment report added another positiveelement. The U.S. economy created 115,000 jobs in April, more than expected,while the unemployment rate held steady at 4.3%. This points to an economy thatis slowing, but still resilient. For markets, this remains a favourable setup:enough strength to avoid a recession, but not so much overheating that theFederal Reserve would need to become more restrictive again.
In Canada, the picture remains more fragile, with the marketmore influenced by oil volatility and an economy that appears more sensitive tothe slowdown. This could keep the Bank of Canada in a more cautious positionover the coming months.
Overall, the week is ending on a constructive tone.Geopolitical risks remain, oil is still volatile, and central banks have notyet fully won the fight against inflation. Even so, markets continue to favourhigh-quality companies capable of delivering solid earnings and benefiting frommajor structural themes such as artificial intelligence, digital infrastructureand productivity.
Markets continue to offer attractive investmentopportunities for investors, as they keep moving higher and remain supported bysolid corporate earnings. Do not hesitate to contact our team to discuss yourfinancial goals and your portfolio.
