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On Tuesday, Benchmark analyst Christopher Kuhn maintained a Hold rating on RXO, Inc. (NYSE: RXO) while adjusting the company’s financial estimates. Kuhn’s assessment comes in anticipation of RXO’s first-quarter earnings report, scheduled for May 7, 2025. With the stock currently trading at $13.98 and showing a significant year-to-date decline of 41%, InvestingPro analysis suggests the stock is slightly undervalued based on its Fair Value model. The analyst expects RXO’s pricing and gross margins to align with management’s projections due to the company’s efforts to enhance yield and the anticipated decrease in buy rates following January. However, concerns about volume growth persist, influenced by an uncertain macroeconomic environment.
Kuhn noted that the March seasonal build did not meet typical levels and that tariff worries are casting doubts on future freight market conditions. He also pointed out that the expected second-quarter surge is now under question. The truckload (TL) market is currently facing weak demand, affected by these uncertainties. This market weakness is reflected in RXO’s performance, with InvestingPro data showing the stock has declined over 52% in the past six months, despite maintaining a revenue base of $4.55 billion. Additionally, spot rates, the load to truck ratio, and tender rejection rates have seen a decline since the start of 2025, albeit they have stabilized, possibly due to a slight advance in demand before the tariffs.
The analyst has placed the first-quarter EBITDA estimates at the lower end of the guidance range, leading to a reduction in the full-year estimates as well, taking into account the seasonality beyond the first quarter. According to InvestingPro data, RXO’s last twelve months EBITDA stands at $117 million, and nine analysts have recently revised their earnings estimates downward. For deeper insights into RXO’s financial health and detailed analysis, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. Despite the current soft market conditions, Kuhn’s Hold rating reflects an expectation of solid EBITDA improvement as 2025 unfolds. He also mentioned that the market seems to have already factored in the potential benefits from the Coyote acquisition, which is slated for 2026.
Kuhn concluded by highlighting that the 2025 EBITDA estimate has now been reduced to almost 20% below the June 2024 estimate, prior to the announcement of the Coyote deal. This revision reflects the adjustments made in light of the recent developments and market dynamics that RXO is navigating. Despite current challenges, InvestingPro Tips indicate that net income and sales growth are expected this year. Subscribers can access 9 additional exclusive ProTips and comprehensive financial metrics through the platform’s detailed analysis tools.
In other recent news, RXO, Inc. reported fourth-quarter results that aligned with earnings expectations, posting adjusted earnings of $0.06 per share and revenue of $1.67 billion, slightly surpassing the consensus forecast. The revenue increase was attributed mainly to the acquisition of Coyote Logistics. Despite this, RXO’s outlook for the first quarter of 2025 appeared less optimistic, with anticipated adjusted EBITDA between $20 million and $30 million. Barclays (LON:BARC) analyst Brandon Oglenski adjusted RXO’s stock price target to $24 from $30, maintaining an Overweight rating while noting the need to revise earnings estimates due to increased transportation costs and reduced revenue expectations.
Oppenheimer also downgraded RXO’s stock from Outperform to Perform, citing economic uncertainty and a challenging trucking environment. The firm adjusted its financial forecasts, lowering the expected adjusted EBITDA for the first quarter of 2025 to $20 million, with full-year estimates for 2025 and 2026 also reduced. The downgrade reflects tempered expectations due to the economic headwinds and market conditions, despite RXO’s potential for operational synergies through the Coyote integration. RXO’s gross margin contracted in the fourth quarter, highlighting continued softness in the freight market. However, CEO Drew Wilkerson expressed confidence in achieving at least $50 million in synergies from the Coyote acquisition.
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