XPO Logistics valuation compelling however macro headwinds dampen development

By Sam Boughedda

XPO Logistics (NYSE:) was reinstated with a Impartial ranking and a $42 per share worth goal at Citi on Wednesday.

Analysts instructed traders in a observe that whereas the corporate’s valuation “stays compelling,” they consider macro headwinds will “possible dampen tonnage development,” even with simpler comps than friends.

“Wanting into 2023, we expect freight weak point in 1Q may drive earnings misses broadly throughout our TL and LTL protection, and we would want to stay cautious forward of that timeframe. Following the spin of RXO, standalone XPO turns into considerably of a ‘present me’ story within the LTL sector,” wrote the analysts.

XPO Logistics shares are up round 1.86% at $38.37 per share thus far on Wednesday, heading into the shut. Though the inventory has rallied round 28% within the final month, it’s nonetheless down roughly 17% in 2022.

“We’re updating our 4Q and 2023 EPS estimates to $0.85 and $3.15, respectively. Our changes mirror the stand alone XPO and account for roughly flat tonnage development in 4Q and modestly adverse development for 2023. On the yield aspect, we consider LSD development in 4Q is achievable. We count on ~60 bps of OR enchancment for 2022, which is inside the firm’s guided vary,” added the analysts.

“Given its place as a decrease margin participant in comparison with friends, it’s possible that extra proof might be required to show that XPO can bridge the margin hole earlier than the corporate can slim the a number of unfold vs. larger margin friends.”