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On Monday, Benchmark analysts maintained their Buy rating and $49.00 price target for Hub Group (NASDAQ:HUBG) stock, aligning closely with InvestingPro’s Fair Value assessment, which suggests the stock is currently undervalued. Following the company’s fourth-quarter earnings report, Benchmark adjusted its earnings per share (EPS) estimates for Hub Group. The adjusted EPS of $0.48 matched expectations, although it included a $0.03 tax benefit. Trading near its 52-week low of $38.07, Hub Group’s Intermodal segment experienced solid volume growth, yet revenue per load declined due to a weak bid season in 2024.
The company provided a positive outlook on broader industry trends, noting that capacity is exiting the market and consumer resilience remains, with inventories becoming more balanced. With a moderate debt-to-equity ratio of 0.31 and sufficient cash flows to cover interest payments, Hub Group anticipates these factors, along with efforts to improve cost structures, will result in better intermodal pricing in the upcoming bid season, which should enhance revenue and earnings in 2025. This improvement is crucial, as InvestingPro data shows the company’s revenue declined by 6.1% over the last twelve months.
Despite the optimistic view, Hub Group has indicated the potential for seasonal weakness in the first quarter and set a mid-point for the 2025 EPS guidance range at $1.90-$2.40, which is below Benchmark’s estimate of $2.29 (FactSet $2.30). Benchmark believes that Hub Group is well-positioned for a rebound in over-the-road conversions to intermodal, especially in the east, due to solid rail service, which has remained reliable despite significant volume surges in the west and disruptions from hurricanes in the east.
New rail agreements, effective cost control, and network alignment in the Logistics business, as well as a new joint venture with EASO, are expected to contribute to Hub Group’s long-term earnings growth. However, the company acknowledges that margins in the ITS sector will remain below mid-cycle levels for the time being.
In other recent news, Hub Group’s fourth-quarter earnings for 2024 met expectations with an adjusted earnings per share (EPS) of $0.48, as reported by Stifel analysts. However, the company’s revenue fell slightly short of estimates, coming in at $1 billion, compared to the consensus estimate of $1.02 billion. For the year 2025, Hub Group anticipates an EPS ranging from $1.90 to $2.40, below the earlier consensus prediction of $2.32.
Stifel subsequently revised Hub Group’s price target, lowering it to $52 from the previous $53, but maintained a Buy rating for the company. Analysts at Stifel credited the company’s robust performance in its Intermodal segment, with better-than-expected volumes and effective cost control.
Despite lower pricing projections due to anticipated inflation, Stifel suggests that Hub Group is well-positioned for success as the industry enters a new growth cycle. This optimism is based on factors such as surplus container capacity, a balanced network, and an improved cost structure. These recent developments indicate that Hub Group is poised for potential growth, despite the minor adjustment in the price target.
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