XPO’s outlook at Moody’s held steady but outlook is now “positive”

LTL carrier XPO had its debt rating affirmed Thursday by Moody’s, but with one significant change: its outlook was adjusted upward to positive from stable.

A positive outlook is often a precursor to a rating increase (as a negative outlook can be a precursor to a rating downgrade.) But a positive outlook does not guarantee an upgrade.

As Moody’s defines a positive or negative outlook in its methodology statement, the two outlooks on either side of stable suggest a “higher likelihood that the credit rating may change in the medium term. In most cases, Moody’s Ratings follows up on an outlook change in about 12-18 months.”

XPO’s ratings were affirmed by Moody’s at Ba2 for the Corporate Family Rating (CFR) and Ba2-PD for its Probability of Default rating.

Although Moody’s didn’t change the company’s rating, the move to a positive outlook comes less than three months after S&P Global Ratings downgraded XPO’s debt to BB from BB+. When S&P made that move, it put the two agencies’ rating of XPO (NYSE: XPO) at levels considered equivalent.

However, the S&P Global (NYSE: SPGI) outlook on XPO is stable, in contrast to the new positive outlook at Moody’s (NYSE: MCO) just bestowed this week.

The change to a positive outlook and the reasons Moody’s cited for the move stand in stark contrast to what S&P Global said in July in conjunction with its downgrade of XPO that came down at the start of July, even though both companies are effectively at the same place.

While S&P Global made its call largely on the basis of its expectation of the freight recession dragging on, Moody’s more optimistic outlook is tied to a “slow recovery” in freight markets as well as various operating changes XPO has implemented.

“The positive outlook reflects expectations that XPO will improve profitability and maintain credit metrics despite current industry challenges,” Moody’s said.

Moody’s added it expects improvement in XPO’s operating performance going into 2026, “driven by cost reduction initiatives and profitable growth from its network expansion following the acquisition of certain terminals previously owned by Yellow Corporation.” XPO acquired the terminals from Yellow in late 2023 and began opening them within the XPO network last year.

And in a sentence that could have been written anytime in the last two to three years, Moody’s said: “In addition, we expect a slow recovery in key transport areas such as freight volumes and spot pricing over the next year.”