Fitch upgrades XPO to investment grade with a stable outlook

By Amara Osei

Fitch Ratings upgraded XPO Inc.’s credit rating to BBB-, putting the less-than-truckload (LTL) carrier one notch above the investment-grade threshold with a stable outlook. XPO now carries an investment-grade rating from one of the three major agencies.

Fitch first rated XPO in March 2023 at BB+ and held that grade until the upgrade. A few months before Fitch’s move, Moody’s and S&P Global Ratings each raised XPO by one notch, to Ba1 and BB+, respectively. Both grades count as equivalent, but both remain below the investment-grade cutoff.

“The upgrade reflects robust operating and commercial execution and structural improvement in XPO’s business and cash flows at a pace above the industry,” Fitch said in a report released late last week. “Significant gross debt repayment shows swift, meaningful commitment to publicly stated leverage targets in 2026.”

The balance sheet behind BBB-

Because XPO trades publicly, its finances sit in plain sight. Between the third quarters of 2025 and 2026, revenue rose 12.4% to $2.37 billion, net income more than doubled to $181 million from $82 million, and the adjusted operating ratio improved 2.6 percentage points to 80.1% from 82.7%.

Debt repayment supplied the more important evidence for Fitch. For the nine months ending September 30, XPO repaid more than $1 billion, versus $50 million in the corresponding 2025 period, or more than 20 times as much.

Fitch forecasts XPO’s free cash flow at around $500 million in both 2026 and 2027, on its own calculation, up from about $270 million in 2025. The agency noted that its cash-flow measurement uses a proprietary methodology.

Leverage also moved lower. Fitch expects EBITDA-to-debt and EBITDAR-to-debt, which includes rent costs, each in the low-2.0x range this year, down from 2.8x and 2.7x in 2025. XPO’s announced 2026 plan favors internal initiatives over large inorganic growth and balances debt and equity repurchases, Fitch said.

What does the upgrade change for shippers and forwarders?

For shippers, the first-order change is credit access, not a posted LTL rate or a guaranteed service expansion. In principle, investment grade can widen XPO’s lender pool and lower funding costs, giving the carrier more room to maintain its asset-based service-center network. It does not, however, promise cheaper freight.

For XPO, lower leverage gives lenders more comfort and management more financial flexibility. It also signals limits on balance-sheet gambles: the company plans to prioritize internal initiatives, avoid large acquisitions and balance debt and equity repurchases in 2026.

For forwarders, a stronger carrier balance sheet lowers perceived counterparty risk and can reduce disruption concerns around a major network provider. It does not add trucks, service centers or contracted capacity by itself. Shippers should therefore treat BBB- as evidence of resilience rather than a rate cut, especially because typical LTL contracts run for one year.

The peer test and sector outlook

Fitch tested XPO against three companies, forming a mixed peer set. Brink’s brings armored-car logistics into the comparison, while TFI International has no Fitch rating; Fitch instead placed TFI’s historical average debt load in the mid-1.0x to low-2.0x range.

Forward Air’s debt load is forecast above 6.0x in 2026 before easing to the mid-5.0x range in 2028. Fitch rates Forward Air at B with a negative outlook, five notches below XPO’s new grade. The contrast is stark, although the peer set does not make for a tidy transport-industry family photograph.

XPO’s stable outlook means Fitch sees little near-term reason to change the rating, either up or down. That matters because a rating can protect financing access while a strategic detour can undo the work.

Recent trucking credit assessments have leaned pessimistic, with LTL carriers receiving only slightly more optimistic outlooks. Fitch’s report breaks that pattern.

“Fitch expects the LTL industry’s profitability to be resilient through business cycles,” it said. “This reflects the competitive barriers tied to established asset-based networks.”

The agency also found that XPO and other large LTL operators demonstrate more pricing rationality through freight cycles than truckload carriers. Contractual relationships provide some stability against the spot truckload market, although typical tenors last only one year. For shippers, that makes LTL a relatively orderly lane, not a fixed-price refuge.

XPO shares have gained 36.7% over the past year and 3% over the past month, but have fallen 7% over the past three months. The company pays no dividend, leaving investors with capital gains rather than income.

Fitch identified two capital-allocation moves that could alter the rating: initiating a large dividend or pursuing a merger-and-acquisition strategy that restricts financial flexibility. XPO’s last significant acquisition involved real estate that bankrupt Yellow Corp. divested in 2024.

XPO was ready to deploy 28 new service centers from that real estate. A large acquisition that restricted financial flexibility would matter more to shippers and creditors than another round of margin polish. That is the bit to watch.

The next test is whether XPO converts roughly $500 million in forecast annual free cash flow into continued financial discipline without returning to large inorganic growth. If it does, Fitch’s stable outlook should hold. For shippers, the practical signal is balance-sheet resilience, not a cheaper rate card or guaranteed extra capacity.