RXO plunges 11% on freight market squeeze, weak guidance
Brokerage margins compress as tight truckload capacity pressures logistics group's Q4 earnings
RXO shares tumbled nearly 11% in pre-market trading Friday after the logistics group reported fourth-quarter earnings that missed analyst expectations and issued weak guidance, as tightening truckload capacity squeezed brokerage margins across the industry.
The Charlotte-based company reported revenue of $1.5 billion for the quarter ended December 2025, down 12% from $1.7 billion in the same period last year and missing the 12% year-over-year decline that analysts had anticipated. While revenue slightly exceeded consensus estimates of $1.49 billion, profitability deteriorated sharply as adjusted EBITDA plunged to $17 million from $42 million a year earlier—a 60% decline.
The GAAP net loss widened to $46 million from $25 million in the prior year, including $31 million in transaction, integration, restructuring and other costs, alongside a $12 million goodwill impairment within the Managed Transportation business. Adjusted loss per share reached $0.07, significantly worse than the expected loss of $0.04 per share and marking a 75% miss relative to analyst estimates.
Gross margins compressed to 14.8% from 15.5% in the fourth quarter of 2024, with adjusted EBITDA margins falling to 1.2% from 2.5%. Brokerage gross margin came in at 11.9%, reflecting the pressure from a tightening freight market that Drew Wilkerson, RXO's chairman and chief executive, said accelerated during the quarter.
"The tightening in the freight market accelerated in the fourth quarter due to continued reductions in truckload capacity, which impacted buy rates and squeezed brokerage gross margin," Wilkerson said in the company's earnings announcement.
The volume metrics illustrated the challenging environment: overall brokerage volume declined 4% year-over-year, with full truckload volume falling 12% even as less-than-truckload volume increased 31%. Last-mile stops grew modestly at 3% annually.
Management provided a cautious outlook for the first quarter of 2026, projecting adjusted EBITDA of just $5 million to $12 million with brokerage volume expected to decline 5% to 10% year-over-year. The company anticipates brokerage gross margins will remain under pressure, projecting a range of 11% to 13% for the quarter.
Despite the near-term challenges, Wilkerson highlighted what he described as strong underlying business momentum. The company's brokerage late-stage pipeline for new business grew more than 50% year-over-year, and the Managed Transportation business was awarded more than $200 million of freight under management during the quarter.
RXO also established a new five-year, $450 million asset-based lending facility to replace its previous $600 million unsecured revolving credit facility, a move the company said would provide more flexibility across market cycles.
Analyst sentiment has turned cautious following the earnings miss, with RXO carrying a "Hold" consensus rating and a price target of $15.00 according to TipRanks. TipRanks' AI Analyst, Spark, also maintains a "Neutral" rating on the stock. The miss follows a trend of earnings disappointments, as RXO also missed EPS estimates in the previous quarter.
The shares were trading around $16.58 heading into the earnings report, giving the company a market capitalization of approximately $2.8 billion. The stock has retreated from its 52-week high of $22.17 but remains well above its 52-week low of $10.43.
RXO's struggles reflect broader challenges in the freight brokerage sector, where capacity constraints and market volatility have pressured margins across the industry. The company's ability to navigate what Wilkerson called the "challenging freight market environment" while pursuing its strategy of profitable growth will be closely watched by investors in the coming quarters.