RXO’s debt ranking has been affirmed by S&P International Scores, however the 3PL nonetheless is carrying a detrimental outlook from the company.
The motion is notable partially as a result of S&P International is taking a conservative stance concerning the route of the freight market.
“It’s unclear if the current rebound in trucking pricing is sustainable,” the company mentioned in its accompanying commentary, a think about holding the ranking regular.
The motion additionally solidifies the dichotomy between the scores of S&P International and Moody’s on the 3PL. RXO’s (NYSE: RXO) ranking on the latter company is Ba1, which is taken into account one notch greater than the BB ranking at S&P International (NYSE: SPGI) that now has been affirmed.
The Moody’s grade is one notch lower than the cutoff between investment-grade and non-investment grade debt, placing S&P’s ranking two notches under that line.
S&P’s BB ranking was additionally affirmed at RXO for its unsecured notes.
Outlook stays the identical
The improved market was not sufficient even to raise RXO off its detrimental outlook. That standing means a downgrade is feasible however not assured given the monetary and market circumstances. There isn’t any restrict to how lengthy an organization stays on a detrimental (or optimistic) outlook.
The detrimental outlook for the corporate, S&P International mentioned, “displays the danger that the corporate will likely be unable to extend its relative profitability or enhance its credit score measures to the degrees we consider are essential to stabilize the ranking.”
However S&P International isn’t utterly dismissing the present market. RXO’s credit score metrics, the company mentioned, will enhance within the subsequent two years “led by larger spot market costs that we anticipate will help elevated earnings amid early indicators of enchancment in freight market circumstances.”
“Nonetheless, the corporate’s margins have lagged these of its rated logistics supplier friends, which has prompted us to downwardly revise our evaluation of its enterprise danger profile (BRP),” S&P added.
In a cautious embrace of the rise in freight charges, the company mentioned “market circumstances have demonstrated early indicators of enchancment.”
However it isn’t sufficient, S&P indicated, for an improve at RXO. “We now place higher emphasis on the corporate’s capability to attain larger margins primarily based on our evolving view of its enterprise danger,” the company mentioned.
RXO is a publicly-traded firm. Scores studies of an company like S&P International or Moody’s (NYSE: MCO) typically reveal little new about its funds. However their views may be extra pointed than fairness analysts.
Surging inventory worth
RXO’s inventory worth has been on a roll, up 77% within the final yr and about 42% within the final month. Based on Barchart, there are 4 robust buys on RXO inventory from fairness analysts, 14 holds and two robust promote suggestions.
S&P International famous that adjusted EBITDA at RXO had fallen to $177 million in 2025 from a peak of $366 million in 2022, when it was spun off from XPO, “even because it almost doubled the income from its brokerage phase following its late-2024 acquisition of Coyote Logistics.”
“Whereas we beforehand seen the corporate as an trade chief when it comes to its margin profile, its efficiency over the previous three years has prompted its margins to say no to ranges in step with or under these of its broader rated peer group,” S&P International mentioned, citing Echo International Logistics for instance.
Echo presently holds a ranking of B- at S&P International. That’s 4 notches lower than RXO’s BB.
Provided that diminished view of RXO’s place, S&P mentioned “we not contemplate RXO’s working efficiency observe document as supportive of a better BRP evaluation.”
An enchancment within the firm’s efficiency owing to a stronger freight market is not sufficient, to shed the detrimental outlook, S&P International mentioned, “The detrimental outlook displays the danger that the corporate will likely be unable to extend its relative profitability or enhance its credit score measures to the degrees we consider are essential to stabilize the ranking,” it mentioned.
Larger freight charges aren’t sufficient for S&P International. RXO, it says, wants to indicate “relative margin outperformance.”
How is it doing as compared?
“Whereas we anticipate a sector-wide restoration to bolster the earnings and metrics of members throughout the broader freight brokering panorama, our ranking stays predicated on RXO demonstrating higher and sustained relative power in its earnings trajectory relative to its quick peer group,” S&P International mentioned. “If we not consider the corporate can differentiate itself from its peer group, we’d doubtless decrease our ranking by eradicating the optimistic comparable ranking adjustment.”
The squeeze on brokers over the previous few years was recapped by S&P International: minimal spot market exercise and diminished demand resulting in an lack of ability “to completely go by way of will increase in procurement prices to its purchasers as a consequence of present contractual obligations led to a big contraction in its margin and heightened earnings sensitivity.”
However even because the scores and detrimental outlook held agency, and S&P International’s view of RXO’s BRP is weaker, the scores company did have reward for the corporate’s place. “We consider RXO is effectively positioned to leverage its important scale as a number one brokerage and harness its in depth proprietary knowledge to unlock procurement efficiencies as market circumstances evolve,” S&P mentioned. Moreover, we anticipate its established relationships with massive enterprise clients will function a key think about securing high-quality enterprise.”
In one other conservative declaration, S&P International mentioned “freight brokers are poised to profit from extra trucking capability exiting the trade, although it is nonetheless early.” The scores company mentioned it’s “cautiously optimistic that the current rebound represents the start of a gradual (and sustainable) enchancment in truck pricing.”
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Whereas the widening of the online that would catch up brokers in legal responsibility actions on account of Montgomery vs. Caribe Transport II has been seen as helpful for bigger gamers, S&P International once more was cautious, owing to different elements.
“It will doubtless be extra impactful for smaller brokers with bigger brokers positioned to probably take market share,” S&P International mentioned. “Offsetting these positives, protracted macroeconomic uncertainty and better oil costs could start to weigh on freight demand.”
A request for remark from RXO had not been responded to by publication time.
