Hub Group stock rating upgraded by Raymond James on intermodal growth

Investing.com - Raymond James upgraded Hub Group (NASDAQ:HUBG) from Market Perform to Outperform and set a price target of $40.00. The transportation company, currently trading at $33.67 with a market capitalization of $2.06 billion, has seen its shares decline 23.65% year-to-date.

The upgrade reflects Raymond James’ view that Hub Group is positioned for structural intermodal growth, particularly with the potential Union Pacific-Norfolk Southern merger. The firm notes that Hub Group is the largest intermodal marketing company with both railroads as primary partners, generating annual revenue of $3.78 billion with a moderate debt level.

Raymond James believes Hub Group will benefit from cyclical margin recovery as the intermodal sector emerges from its trough, following trends in the truckload space. The firm also cites pre-funded growth supporting free cash flow conversion into the upcycle. According to InvestingPro, the company has remained profitable over the last twelve months, with analysts predicting continued profitability this year.

The investment firm acknowledges near-term yield pressure and brokerage headwinds but considers these challenges already priced into the stock. Hub Group shares have remained range-bound between $34-38 since discussions about the potential UNP-NSC merger intensified.

Raymond James points out that Hub Group currently trades at a "significant discount to cyclical transport peers" based on the firm’s estimates, suggesting the market has not fully appreciated the potential value the railroad merger could generate for the company.

In other recent news, Hub Group has completed the acquisition of certain intermodal assets from Marten Transport, adding approximately 1,200 refrigerated containers and enhancing its relationships with food and beverage industry shippers. This acquisition is part of Hub Group’s strategy to bolster its core business and improve network efficiency. In terms of financial analysis, Benchmark has reiterated its Buy rating for Hub Group with a price target of $40, although it has lowered its estimates due to slower-than-expected intermodal volume growth. Similarly, Stifel has adjusted its price target to $41, maintaining a Buy rating but citing soft freight demand and uncertainty in downstream consumption.

Hub Group also announced the passing of board member Lisa Dykstra, who served on several key committees since 2022. The company has not yet disclosed plans to fill the board vacancy. Additionally, Hub Group’s Chief Legal Officer, Thomas P. LaFrance, will retire effective January 2, 2026, and will assist with transition activities until March 6, 2026. These developments reflect ongoing changes in Hub Group’s strategic and operational landscape.

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