XPO stock gains momentum under CEO Harik, Citi initiates with a Buy

On Wednesday, Citi initiated coverage on XPO Logistics , Inc. (NYSE: NYSE:XPO) with a Buy rating, setting a price target of $127.00 per share. The firm’s analysis points to a period of significant positive transformation for the logistics company under the leadership of CEO Mario Harik.

XPO Logistics is currently experiencing robust momentum, which is attributed to service improvements leading to revenue growth and margin expansion. The company's strategic moves, including the integration of terminals acquired from Yellow (OTC:YELLQ), are expected to enhance operational density and advance its linehaul insourcing efforts.

The firm also noted XPO's efforts to increase its premium service offerings. These initiatives have led to considerable service enhancements, drawing from the strategies and best practices of industry leader Old Dominion. This approach is seen as a key driver in XPO's current success.

Additionally, XPO Logistics is in the advanced stages of transforming into a pure-play less-than-truckload (LTL) transportation provider. This shift is anticipated to bring a sharper focus to the company's operations. Part of this strategic pivot may include the divestiture of its European business, which would further streamline the company's focus on its core LTL services.

Citi's coverage and optimistic outlook for XPO Logistics reflect the company's ongoing efforts to refine its business model and capitalize on growth opportunities within the logistics sector. The new price target of $127.00 represents Citi's confidence in the value and potential of XPO's stock.

In other recent news, XPO Logistics has seen a flurry of activity from financial analysts. Despite a dip in third-quarter tonnage, Benchmark retained its Buy rating on XPO shares with a steady price target of $140.00. The firm adjusted its fiscal year 2024 and 2025 estimates for XPO, but remains positive about the stock's long-term earnings growth.

Similarly, TD Cowen revised its price target for the company from $143 to $142, maintaining a Buy rating. This decision was influenced by the company's quarter-to-date trends, specifically a 4.6% decrease in August's tonnage per day.

Stifel raised its price target for XPO, from $120.00 to $125.00, following the company's strong second-quarter performance, which surpassed market expectations. The company reported an adjusted EBITDA of $343 million and adjusted earnings per share of $1.12. The North American Less-Than-Truckload segment significantly contributed to these figures.

In addition, BMO Capital held its Outperform rating and $145.00 stock price target for XPO Logistics, amid rumors that the company may be attempting to divest its European transportation segment. BMO Capital believes a successful sale could lead to a mid-to-high single-digit percentage increase in earnings per share for XPO.

InvestingPro Insights

XPO Logistics' recent strategic moves and operational improvements, as highlighted in Citi's analysis, are reflected in the company's financial metrics and market performance. According to InvestingPro data, XPO's revenue growth stands at 5.47% over the last twelve months, with a notable 8.45% growth in the most recent quarter. This aligns with the article's mention of robust momentum and revenue growth.

The company's focus on service improvements and margin expansion is evident in its EBITDA growth of 23.88% over the last twelve months, significantly outpacing revenue growth. This suggests that XPO is successfully translating its strategic initiatives into improved profitability.

InvestingPro Tips highlight that XPO is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of just 0.11. This could indicate that the stock is undervalued considering its growth prospects, potentially supporting Citi's bullish stance.

It's worth noting that while XPO has shown strong performance, 12 analysts have revised their earnings downwards for the upcoming period. This contrasts with the overall positive outlook and may warrant closer attention from investors.

For those interested in a deeper analysis, InvestingPro offers 11 additional tips for XPO Logistics, providing a more comprehensive view of the company's financial health and market position.

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