XPO’s Post

Transcript

The Dow transports coming off their best daily performance since mid November gaining more than 3% yesterday. The index notching 1/5 positive session in a row. One person who knows a whole lot about that space is our next guest. Joining us and CNBC exclusive is Mario Harik XBOCT. Mario, good morning, great to see you. Good morning friend, Good to see you as well. Alright, so you're making some news today. You're announcing a new service for cross-border traffic, you're calling it XBO Mexico. Tell me what kind of demand are you seeing and what sectors do you see in that demand from? Well, first thing, we're expanding our Mexico service significantly in terms of capacity, border crossing locations and getting more technology capabilities for our customers And the demand that we're seeing, we're seeing more and more companies near shorting that manufacturing. So today, 2/3 of our customers are industrial companies and many of these companies are setting up manufacturing plants here in North America to be closer to their customers and that includes Mexico as well. So we're expanding that service so we can support our customers with that movement. Alright. So yesterday, we saw another truck. But he different space, but JB Hunt, they reported another volume slowdown. You're in a very different space. There are a lot of largely focused on consumer goods, container shipping. You say you're mostly focused on industrial customers, but you'd also have some exposure to the consumer space. One of your customers is Alta. Give us a sense. We've had retail earnings recently. What are you seeing when it comes to consumer facing names and other retail names when it comes to demand and also inventory? Well, if, if we think about it today, 2/3 of our customers, our industrial companies, but one thirds of our customers are consumer tech companies, either retail, Consumer Packaged Goods type companies. And we're seeing that segment. Actually we're seeing more strength in it. If you look at the at the second quarter, we've seen retail sales be up in the month of June higher than expectations and that's translating into more shipping in the in the retail sector. On the industrial side, things have been muted for awhile now. Usually we look at the ISM manufacturing index as a good measure of how the industrial economy is doing. And it's been more than a in a contraction type space, but usually if the ISM is at 50, that's the even mark and it's been hovering in that 4849 range for a while now. So we're seeing the industrials being muted, but getting worse, but not getting better. And we're seeing a bit more strength in the retail, in the retail sector. Alright, so one of things we've been following is a, you know, Jay Paul's guidance and what he's been saying about possible rate cuts. As we look at a increasing likelihood of a rate cut coming up in September, what does that mean for your business? What does that mean for the business of your customers? Well, when you think about trees as a whole signing on the consumer side, lower rates leads to consumer having more disposable income and also stimulates demand from the consumer perspective. And that leads to more spending, which leads to higher retail shipping in in our industry. On the industrial side, lower rates means more capital being deployed towards purchases, which also stimulates the industrial economy as well. So no matter how you look at it, we've been in a freight recession for two, two years, Frank, and usually these things last for one year. So as you start seeing rates coming down, we believe that you're gonna start. The higher demand from shipping standpoint that would stimulate the not upside the next upcycle for transportation, right? You know, you're mentioning there has been a freight recession going on for quite a while right now. It comes after that big boom during the pandemic. Recently, we've seen a rotation in into the Dow transports you mentioned at the top of the show. I have to ask him not asking to be political, but some of that seems to be the quote UN quote, Trump trade people rotating with the due to the confidence that they believe that President Trump's gonna win. How do you see the election impacting your business? The idea that there could possibly be tariffs? Expanding on goods, the emphasis on domestic production, things like that, I mean, how do you see that impacting your business? I'm not asking you about which candidate you think is gonna win, but just the possibility of who's gonna win impacting you. So regardless of the outcome of the election, the way we think about it, if, if our customers are near shoring more of their manufacturing here to North America, whether it was more tariffs on the trade or whether it then wanting to get that product closer to their customers. So they are avoiding supply chain disruptions and getting the product there faster. We want to be there for them. So usually whenever production makes it over here to North America, that helps the less than truckload industry stimulate more demand. Now in terms of the impact on the business, I believe the bigger impact on freight transportation, it's gonna be what happened with the rates from the Fed. Perspective, the CPI having been lower than expected in the month of June is leading to potentially rates coming down, you know call it in the late summer, early fall and that's gonna have the bigger impact on our business in terms of seeing that demand simulate again. But now keep in mind Frank, for us and our business, the last data point that we published publicly was the month of May and our shipment count was up 4% on a year on year basis. So despite the the freight recession, it goes back to the great service we're offering our customers and they are rewarding us with with higher market share as well. Alright, Mario Harik XPO shares. Over 30% year to date. Great to see you. Your new service, XO Mexico Plus. I wanna leave out the plus. Everybody's got that plus on it nowadays. Mario, good to see you.