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Investing.com -- Moody’s Ratings has affirmed XPO, Inc.’s Ba2 corporate family rating while changing the outlook from stable to positive, reflecting expectations of continued operational improvement through 2026.
The rating agency maintained XPO’s Ba2-PD probability of default rating, Ba1 senior secured bank credit facilities and senior secured notes ratings, and Ba3 rating on senior unsecured notes. The SGL-2 speculative grade liquidity rating remains unchanged.
Moody’s expects XPO’s performance to strengthen, driven by cost reduction initiatives and profitable growth from its network expansion following the acquisition of terminals previously owned by Yellow Corporation. The agency also anticipates a gradual recovery in freight volumes and spot pricing over the next year.
The ratings reflect XPO’s significant position in the North American less-than-truckload (LTL) transportation market, though the company faces exposure to cyclical and competitive industry conditions. Despite current industry challenges, Moody’s projects XPO will maintain solid profit margins and strong interest coverage, with debt-to-EBITDA stabilizing below 3.0x in 2026.
XPO’s liquidity position remains good, supported by a fully available $600 million revolving credit facility, a $200 million letters of credit facility with $67 million available, and a cash balance of $225 million as of June 30, 2025. Free cash flow is expected to remain positive in 2025, primarily due to decreased capital expenditures for truck fleet upgrades and lower cash taxes.
The ratings could be upgraded if XPO maintains prudent financial practices, such as using proceeds from a potential European business sale to reduce debt. Conversely, ratings could face downward pressure if market softness leads to revenue and margin declines, or if the company pursues aggressive financial strategies like significant debt-financed acquisitions or increased shareholder payouts.
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