On Wednesday, Benchmark analysts adjusted their outlook on shares of XPO Logistics (NYSE:XPO), increasing the price target to $155 from the previous $150 while reaffirming a Buy rating on the company’s shares.
According to InvestingPro data, XPO, currently valued at $15.78 billion, has delivered an impressive 56.75% return over the past year, though analysis suggests the stock is trading above its Fair Value.
The decision follows a period of sustained execution by XPO, despite challenges in the industrial economy, as highlighted by the weaker performance of FDX Freight in late December. With annual revenue of $8.09 billion and a solid financial health score of 2.5/5 from InvestingPro, XPO has demonstrated resilience in challenging market conditions.
XPO’s strategic moves, such as terminal expansion and the growth of its local account business, are anticipated to mitigate some of the broader industrial weakness. However, Benchmark has revised its fourth quarter and full-year 2025 earnings estimates for XPO downward, taking into account the current industrial environment. Quarter-to-date volume trends are reportedly aligning with Benchmark’s projections when seasonal factors for December are considered, but revenue from fuel has been lower than expected.
The company has not made public its quarter-to-date revenue per hundredweight excluding fuel, but Benchmark believes XPO is on track to achieve a year-over-year growth of approximately 4%. This represents a slowdown from the 8.9% growth in the second quarter and 6.7% in the third quarter, attributed to more challenging comparisons from the previous year.
In terms of tonnage, the trends are consistent with normal seasonal patterns. Due to XPO’s yield growth that surpasses market averages and its cost efficiency initiatives, Benchmark anticipates that the operating ratio (OR) deterioration for XPO’s North American less-than-truckload (LTL) segment in the fourth quarter will be slightly better than the typical sequential 250 basis points deterioration.
This performance would place XPO at the upper end of their guidance range for OR improvement, which is forecasted to be between 150 to 250 basis points for the fiscal year.
The revised price target of $155 reflects Benchmark’s confidence in the company’s ability to navigate the current economic landscape and their expectations for 2026. The firm’s analysts have incorporated these factors into their valuation as they look ahead to XPO’s future performance.
With analyst targets ranging from $85 to $181 and the next earnings report due on February 6, 2025, investors seeking deeper insights can access comprehensive analysis and 13 additional ProTips through InvestingPro’s detailed research reports.
In other recent news, XPO Logistics has experienced a series of analyst adjustments following a robust financial performance. Stifel analysts downgraded the company’s stock from Buy to Hold and lowered the price target to $124.
Despite this, the company’s strategic repositioning through the spin-off of segments into GXO Logistics and RXO has resulted in a healthier financial standing. BMO Capital Markets reiterated an Outperform rating on XPO shares, expressing confidence in the company despite a subdued Less-than-Truckload (LTL) market.
XPO Logistics reported a 4% year-over-year increase in revenue, reaching $2.1 billion, and a 20% rise in adjusted EBITDA to $333 million in the third quarter. The company’s adjusted diluted EPS also climbed by 16% to $1.02, exceeding analyst expectations. As a result, several firms, including JP Morgan, TD Cowen, and BofA Securities, have increased their price targets.
Despite a decrease in November Tons/Day by 4.0% year-over-year, XPO Logistics is projecting interest expenses between $225 million and $230 million, and an adjusted effective tax rate of 24%-25% for the full year 2024. These developments highlight XPO Logistics’ resilience amidst industry challenges.
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