Stifel cuts CTOS stock price target to $5, holds rating

On Wednesday, Stifel analysts adjusted their outlook on Custom Truck One Source (NYSE:CTOS) by reducing the price target to $5.00 from the previous $5.50, while keeping a Hold rating on the stock. The stock currently trades at $3.39, having declined nearly 23% in the past week. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, with analysts maintaining price targets ranging from $5.00 to $9.00. The analysts noted the company's improved order intake for Truck Equipment Solutions (TES) that began in the fourth quarter of 2024 and has persisted at least through February 2025. Additionally, they observed that rental utilization trends have shown continued improvement into the first quarter of 2025.

The Stifel team highlighted that, excluding engineering respondents, there was a net 14% of survey participants who reported better machinery availability in the first quarter of 2025, compared to 7% in the last quarter of 2024 and 33% in the same period the year before. The analysts interpret this year-over-year tightening in machinery availability as a sign of stronger rental utilization, particularly in the crucial Transmission and Distribution (T&D) market.

Despite these positive trends, the analysts at Stifel have decided to maintain their Hold rating on Custom Truck One Source. They cited potential challenges stemming from tariffs, which could affect roughly 30% of the company's material purchases that are imported, mainly from Mexico and Canada. This factor introduces an element of risk to the demand outlook, especially considering that about 45% of the company's end market mix is not related to T&D. The analysts believe these risks warrant a cautious stance on the stock at this time.

In other recent news, Custom Truck One Source reported its fourth-quarter 2024 earnings with an impressive earnings per share (EPS) of $0.12, surpassing the forecasted $0.04. Despite this, revenue was slightly below expectations at $521 million compared to the projected $543.32 million. DA Davidson maintained a Buy rating on the company, with a consistent price target of $9.00, citing improved rental utilization and a positive earnings outlook. Stifel analysts, however, kept a Hold rating with a $5.00 price target, noting the revenue and EBITDA shortfall in the fourth quarter. Custom Truck One Source's guidance for 2025 suggests revenue projections above analysts' expectations, although the EBITDA midpoint is slightly below consensus. The company experienced a significant year-over-year increase in Transmission Equipment Segment orders, supporting a favorable 2025 revenue outlook. These developments reflect a mix of strong performance in certain areas and challenges in others, as the company navigates the current economic landscape.

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