RXO

RXO's FY2025 print shows the Coyote acquisition working on the top line — revenue jumped 26.2% to $5.74B, with management attributing $1.2B of incremental truck brokerage revenue and a 13% volume lift in last mile. The asset-light model is intact, operating cash flow swung sharply higher to $51M (from $8M implied prior), and at 0.7x sales the stock is priced for a freight-cycle trough rather than a growth story. That combination — a scaled #3 brokerage at trough multiples with a tangible integration catalyst — is why this isn't a sell.

But the income statement is genuinely ugly and the MD&A explains why it stays that way. Cost of transportation and services rose to 80.3% of revenue from 78.4%, and management is explicit that brokerage gross margin compressed because 'the market tightened during 2025, with capacity rapidly exiting in certain regions driven primarily by regulatory changes and enforcement, which caused buy rates to increase faster than our contractual sell rates.' Last mile cost of transportation also rose 2.7 points on freight mix. The result: operating loss widened to -$79M from -$56M, net loss of -$100M, ROE -6.5%, and retained earnings deficit deepened 35% to -$384M. SG&A grew 25% absorbing a full year of Coyote. This is not a business currently earning its cost of capital.