Less-than-truckload (LTL) carrier XPO has received a debt rating upgrade from S&P Global Ratings, though the company — with one exception — remains below the dividing line between investment-grade and non-investment-grade debt.

At the issuer level — the rating most consequential for the company — S&P Global Ratings raised its issuer credit rating on XPO (NYSE: XPO) to BB+ from BB, leaving XPO one notch short of the investment/non-investment cutoff. That notch is the distance between BB+ and BBB-, the lowest rating on S&P’s scale that counts as investment grade. The threshold matters in practical terms: many institutional bond funds and indexes hold only investment-grade paper, so a borrower above the line can reach a far wider investor base and generally borrows at lower cost.

The upgrade follows a prior downgrade: XPO’s debt rating was cut to BB from BB+ in July 2025, an action tied at the time to a continuing weak freight market. The latest move puts the issuer rating back where it stood before that cut.

The single obligation on which S&P Global assigns XPO an investment-grade rating is an issue-specific BBB- on the company’s senior secured debt. That rating was already in place and was affirmed in the most recent action. XPO’s senior unsecured debt, meanwhile, received a two-notch increase to BB.

S&P now rates XPO above Moody’s

With the change, S&P Global (NYSE: SPGI) now holds its corporate rating for XPO at a higher rating equivalency than Moody’s (NYSE: MCO) — two of the three agencies that dominate global credit ratings, alongside Fitch. Because Moody’s Ba2 maps to BB on the S&P scale, the two agencies are now split by one notch, a situation credit markets refer to as a split rating.

Last September, Moody’s affirmed its rating on XPO at Ba2 — two notches below the investment-grade cutoff — while setting the company’s outlook at “positive.” On Moody’s scale, that cutoff is Baa3, so the next rung up, Ba1, would leave XPO one notch short there as well, mirroring the position it now occupies at S&P. A positive outlook often serves as a precursor to a ratings upgrade, though a company can remain under that designation for a year or more. XPO is coming close to 11 months on a positive outlook at Moody’s with no change in its rating.

XPO had a stable outlook from S&P Global. A positive outlook is not a prerequisite to a ratings upgrade.

XPO declined comment on the S&P Global action.

A stronger market propels the move

S&P Global’s rationale for the increase in XPO’s debt rating was heavily rooted in the strengthening fundamentals of the trucking market — with spillover business from truckload to LTL a key part of that — and in what the improved market has meant for key debt-rating metrics such as the ratio of funds from operations (FFO) to debt, a core credit yardstick that measures the cash a company generates against what it owes.

S&P Global said the FFO-to-debt ratio was 35.7% in the second quarter and is expected to be 35% to 36% for the year. Its earlier expectation was a full-year rate of 30%. The agency also expects XPO’s ratio to be 40% next year.

Addressing the company’s operating performance, S&P Global cited what it described as a decision to “insource more of its linehaul,” calling it part of a three-year trend.

Less outsourcing

A quick glance at recent purchased transportation trends — the amounts a carrier pays outside providers to haul its freight — does not at first suggest much has changed. In the second quarter, XPO spent $464 million on purchased transportation, up from $426 million a year earlier. Three years ago, in the second quarter of 2023, the spend on purchased transportation was $423 million.

The comparison with four years ago is more revealing. In the second quarter of 2022, XPO’s purchased transportation spend was $525 million on a revenue base of $2.047 billion, or 25.6% of revenues. In the second quarter of 2026, purchased transportation of $464 million represented 19.7% of revenues of $2.355 billion.

S&P Global used other metrics to tout the changes. “In 2023, XPO outsourced 20.9% of its linehaul miles with S&P Global Ratings-adjusted EBITDA margins of 14.9%, compared with 6.7% and 17.8%, respectively, for 2025,” the agency said.

S&P Global said there have been “other service improvement initiatives…more efficient routing, lower damage claims.”

Truckload spillover

The spillover from the truckload market — which LTL carriers often see as a negative trend rather than a positive one, because it can create operational issues with what the companies describe as “product mix” — received a thumbs up from S&P Global.

“Tighter trucking supply (revocation of nondomiciled licenses, English language proficiency testing, decertification of commercial driver license schools) and higher fuel costs have caused shippers to evaluate alternatives to TL shipping,” the ratings agency said. “This is contributing to a rebalancing of loads across various transportation modes (intermodal, LTL, TL). While we believe some TL pricing increases will subside once oil prices normalize, structural factors from lower capacity will likely persist.”

S&P Global’s forecast is that XPO’s North American tonnage will rise 2% to 3% this year, with a yield increase of 4% to 5%. Through the first six months of 2026, pounds per day at XPO was up 0.6%. Revenue per shipment excluding fuel surcharge revenue — the metric for yield — was up 1.8% for the first six months of the year.

“For 2027, we view the capacity dynamics playing out in 2026 to be largely structural, with the potential for better macroeconomic conditions, and therefore expect tonnage and yield growth to be around 3%-5%,” S&P Global said.