BofA cuts XPO stock price target to $119, maintains buy rating

On Thursday, BofA Securities adjusted its price target for XPO Logistics , Inc. (NYSE:XPO), bringing it down to $119 from the previous $131, while upholding a positive Buy rating on the company’s shares. Currently trading at $106.12, XPO maintains a strong consensus among analysts, with targets ranging from $85 to $165. The adjustment reflects a careful evaluation of the company’s performance and prospects in the less-than-truckload (LTL) sector. According to InvestingPro analysis, XPO appears slightly undervalued based on its Fair Value calculations, despite trading at a relatively high P/E ratio of 30x.

XPO Logistics has been recognized for its sustained progress in enhancing LTL yield, productivity, and service quality. With annual revenue of $8 billion and an EBITDA of $1.2 billion in the last twelve months, the company is actively working to close the margin gap with its industry-leading peer, Old Dominion Freight (NASDAQ:ODFL) Line. In the first quarter of 2025, XPO’s operating ratio stood at 85.9% compared to Old Dominion’s 75.4%, marking a 10.5 percentage point difference, which is an improvement from a 12.1-point gap in the same quarter of the previous year. InvestingPro data shows the company maintains a "Fair" overall financial health score, with particularly strong marks in profitability metrics.

Despite a modest downward revision in its baseline tons per day forecast, XPO has reiterated its goal to achieve a 150 basis point improvement in its LTL adjusted operating ratio for the year 2025. The company remains confident that even if volume trends fall below seasonal expectations, it can still realize a 100 basis point enhancement in its operating ratio. This optimism comes despite recent challenges, as InvestingPro data indicates the stock has experienced a significant price decline over the last three months, with year-to-date returns down 19%.

XPO anticipates further revenue per hundredweight and per shipment improvements throughout the remainder of 2025, driven by robust pricing dynamics bolstered by high service standards, an expansion of premium service offerings, and growth in local channel segments. Notably, local tons per day increased by double digits in April, building on the high single-digit growth observed in the first quarter of 2025.

The company has also reported an acceleration in contract renewals during the first quarter, with increases in the mid- to high single-digit range. Additionally, XPO has successfully reduced its reliance on outsourced linehaul miles, which declined to 8.8% from 10.7% in the fourth quarter of 2024 and 18.1% in the first quarter of 2024. This strategic move is part of XPO’s ongoing efforts to enhance operational efficiency and cost-effectiveness.

In other recent news, XPO Inc. reported its first-quarter 2025 earnings, revealing an adjusted diluted earnings per share (EPS) of $0.73, which surpassed the analyst forecast of $0.68. However, the company’s revenue fell short, coming in at $1.95 billion against the expected $1.98 billion. Despite this revenue miss, XPO demonstrated resilience with a 9% year-over-year increase in operating income, reaching $151 million, and a 3% rise in net income to $69 million. The company continues to focus on strategic investments, particularly in AI technology, which has enhanced operational efficiency. XPO anticipates further margin improvements in the second quarter, driven by yield growth and cost management strategies. The company also considers a share repurchase program of up to $750 million. Analyst firms like Evercore ISI and BMO Capital Markets have shown interest in XPO’s pricing strategy and competitive positioning amidst industry challenges. These developments reflect XPO’s ongoing efforts to strengthen its market position despite a challenging freight market.

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