On Wednesday, Benchmark analyst Christopher Kuhn reiterated a Hold rating on RXO, Inc. (NYSE: RXO), while also adjusting the company’s financial estimates ahead of its fourth-quarter earnings report, scheduled for February 5. According to InvestingPro data, RXO, currently trading at $24.98 with a market cap of $4.02 billion, appears overvalued based on its Fair Value analysis.
Kuhn highlighted that factors such as the pre-holiday surge in the DAT load-to-truck ratio and tender rejection rates, which have been elevated since October due to a port strike and hurricanes, could have a mixed impact on RXO’s performance.
RXO, which experienced a tightening market that led to higher spot prices, is expected to have leveraged some spot volume and project work to mitigate the impact of rising buy rates, similarly to the third quarter.
While the company maintains a moderate debt level and healthy current ratio of 1.33, Kuhn expressed concerns about the legacy Coyote business, noting that it might not have had the same opportunities, potentially leading to squeezed gross margins in the truck brokerage segment. InvestingPro subscribers can access detailed analysis of RXO’s financial health metrics and 6 additional exclusive ProTips.
As a result, Benchmark has lowered its fourth-quarter estimates for RXO. The firm’s projection for the company’s EBITDA is within RXO’s guidance range, but its first quarter and full-year 2025 estimates fall short of initial expectations set during the acquisition period. The analyst foresees potential for RXO to enhance Coyote’s spot volume capture in the long term, but cautions that it may affect near-term results.
The report also includes a downward revision of RXO’s 2025 EBITDA and earnings per share (EPS) estimates, along with the establishment of the firm’s 2026 projections. While RXO has not been profitable over the last twelve months, analysts tracked by InvestingPro expect the company to turn profitable this year. Despite the anticipated seasonal weakness in the first quarter, Benchmark’s estimates incorporate a solid EBITDA improvement throughout 2025.
The analyst suggests that the current market prices already reflect the expected benefits from the Coyote acquisition. Kuhn also notes that the revised 2025 EBITDA estimate is nearing the level projected in June before the Coyote deal was announced, indicating a cautious outlook for the company’s near-term financial performance.
In other recent news, RXO Inc. has reported strong third-quarter results, with a revenue of $1.04 billion and an adjusted EBITDA of $33 million, surpassing Stifel’s estimate. The company has also finalized the acquisition of Coyote for $1.025 billion, which positions it as the third-largest freight brokerage firm. These developments come after RXO shareholders approved the issuance of common stock upon the exercise of pre-funded warrants.
Analyst coverage has been mixed, with Goldman Sachs resuming coverage with a Neutral rating and a price target of $29.00, while Citi and Stifel have downgraded their ratings to Neutral and set new price targets of $33.00 and $26.00 respectively. RXO anticipates a Q4 adjusted EBITDA to be between $40 million and $45 million.
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