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Investing.com - JPMorgan downgraded Custom Truck One Source (NYSE:CTOS) from Neutral to Underweight on Wednesday, while lowering its price target to $5.50 from $6.00. According to InvestingPro data, the company currently trades at elevated EBITDA multiples and shows signs of being slightly overvalued, with two analysts recently revising earnings expectations downward.
The downgrade reflects JPMorgan’s expectation that CTOS will underperform its coverage universe over the next 6-12 months, despite the stock’s approximately 25% year-to-date gain, which outpaced both the S&P 500’s 9% rise and the Machinery index’s 7% increase.
JPMorgan anticipates vocational truck sales will soften in coming quarters following weak orders data in recent months, a significant concern given that Truck & Equipment Sales represent approximately 60% of Custom Truck One Source’s revenue.
The investment bank also expects profitability in the Truck & Equipment Sales segment to face pressure from existing tariffs and a possible Section 232 announcement later this year or in early 2026.
JPMorgan’s fiscal year 2026 EBITDA forecast for Custom Truck One Source now stands at $396 million, approximately 5% below consensus, with the new price target based on a forward EV/EBITDA multiple of about 7x, which aligns with the company’s historical average but sits below its current valuation.
In other recent news, Custom Truck One Source reported second-quarter 2025 revenue of $512 million, surpassing the consensus estimate of $467 million. This performance was driven by strong results in the Truck and Equipment Sales segment and positive trends in Transmission and Distribution. Despite this revenue growth, the company reported an earnings per share of -$0.13, missing the forecasted -$0.05. Following these results, Stifel reiterated its Buy rating on the company, maintaining a price target of $7.00. DA Davidson also adjusted its outlook, raising the price target to $8.00 while keeping a Buy rating. The increase in the price target was influenced by healthy performance indicators in rentals, truck sales, orders, and margins. These developments reflect a period of significant activity for Custom Truck One Source, with analysts maintaining a positive outlook on the stock.
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