Citi cuts XPO stock price target to $148 from $170

On Wednesday, Citi analyst Ariel Rosa adjusted the price target for XPO Logistics (NYSE:XPO) shares to $148, down from the previous $170, while maintaining a Buy rating on the stock. The stock currently trades at $116.80, with analyst targets ranging from $85 to $180. According to InvestingPro data, nine analysts have recently revised their earnings expectations downward for the upcoming period. Rosa noted that XPO Logistics reported a year-over-year decrease in daily tonnage of 8.1% for February, which was a slight improvement from the 8.5% drop in January. This trend indicates that the company faces a challenge to meet its previous guidance for a mid-single-digit decline in the first quarter of 2025. Despite these challenges, XPO maintains strong fundamentals with revenue of $8.07 billion in the last twelve months and a healthy gross profit margin of 17.4%.

Rosa mentioned that earlier estimates were a 6% decline, which have now been revised to 7.5%. The revision comes amid growing concerns about the potential impact of economic instability and tariffs on less-than-truckload (LTL) volumes. This concern is shared across the industry, with peers such as ODFL and SAIA also being monitored for similar risks.

Despite the downward trend in volume, XPO’s CEO Mario Harik expressed optimism. He highlighted that February volumes exceeded seasonal expectations and that strong pricing is anticipated to support the company’s margin outlook. InvestingPro analysis shows the company maintains a Fair financial health rating, with particularly strong scores in profitability and growth metrics. For deeper insights into XPO’s financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. XPO is expecting to see a sequential operating ratio (OR) improvement in the first quarter of 2025 compared to the 86.2% in the fourth quarter of 2024, with a goal of 150 basis points of operating ratio improvement for the full year from 2024’s 84.8%.

To achieve these targets, XPO Logistics plans to leverage a variety of self-help initiatives. These include improving service, taking advantage of pricing opportunities, insourcing linehaul operations, opening new terminals, rolling out premium offerings, and enhancing the mix of local business to help counterbalance the volume weakness. These strategies are part of the company’s efforts to maintain profitability and operational efficiency in a challenging economic environment. The company’s focus on operational efficiency is reflected in its strong return on equity of 27% and current ratio of 1.06, indicating solid financial management.

In other recent news, XPO Logistics reported its fourth-quarter earnings for 2024, surpassing expectations with an adjusted earnings per share (EPS) of $0.89, compared to the forecasted $0.6556. The company achieved a 31% increase in full-year adjusted EPS and a 27% rise in adjusted EBITDA, although it slightly missed revenue expectations with $1.9 billion against a forecast of $1.93 billion. Full-year revenue grew by 4% to $8.1 billion, and XPO expanded its premium service offerings while integrating 25 new service centers. Stifel analysts upgraded XPO’s stock rating from Hold to Buy, setting a price target of $147, citing the company’s effective strategy in integrating acquisitions and its improved financial condition. Benchmark analysts also raised their price target for XPO from $155 to $160, maintaining a Buy rating, and noted the company’s better-than-anticipated less-than-truckload (LTL) volume trends. XPO’s strategic efforts have resulted in a year-over-year LTL operating ratio improvement of 30 basis points for the quarter and 260 basis points for the year. The company anticipates further improvements in its operating ratio, which could exceed typical sequential increases in the first quarter.

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