Trucking and logistics company XPO Logistics, saw its share fall by ~10% on Tuesday after it had issued an earnings warning of an 8-K filing with the SEC.
According to this filing, XPO expects its performance to remain on track to generate approximately $625 million of free cash flow for 2018 while for 2019 it expects to generate approximately $650 million of free cash flow. But the company revised its EBIDTA growth rate and expects to grow its adjusted EBITDA only by 12%-15% on a y-o-y basis in 2019.
Although it’s a double digit EBIDTA growth, but this is what led to the share tumble of 9.6%. Just a little over a month ago, XPO CEO Brad Jacobs had told investors to expect something closer to 15% to 18% adjusted EBITDA growth. Therefore, this update suggests that XPO would substantially fall short of its previous estimate even at the low end.
On top of that, the other measure of profitability discussed in the SEC filing free cash flow indicates that XPO is targeting only 4% FCF growth next year, which implies that growth - which is already slower than what promised by the management- will slow further in the new year.