By Investing.com Staff
XPO Inc (NYSE:XPO) stock gained 18% on Thursday after naming former Old Dominion executive Dave Bates as its COO. Despite the big jump, several analysts see the stock continuing higher with one analyst commenting today "If You Can’t Beat Them, Hire Them."
Analysts at both Citi and JPMorgan upgraded shares to Buy Friday, with others lifting their price targets.
"We are upgrading shares of XPO to Buy from Neutral for a number of reasons catalyzed by the recent addition of two executives from Old Dominion," Citi analysts said in their upgrade note.
"We think the addition of Dave Bates as COO, following former OD CFO Wes Frye’s addition to the board, greatly enhances the company’s operational credibility. In addition, we think two senior executives joining from OD can lead to further hires to broaden out the operating/sales ranks. With this key addition, we are growing more confident XPO can close its OR and pricing gap vs. peers Old Dominion (NASDAQ:ODFL) and Saia (NASDAQ:SAIA)."
The analysts think the prospects for real OR improvement could insulate the stock from soft near-term results. In addition to the upgrade, they raised their price target by 35% to $50 per share.
The impact of the executive news was not lost on JPMorgan analysts, who upgraded the stock to Overweight with a $52 price target.
"Execution has been a persistent overhang on XPO’s LTL operation over the years and the strategy unveiled last quarter that focused more on volume to build density at the expense of yield only reemphasized this point," the analysts commented.
"The Board took a significant step to build credibility that XPO could in fact close the widening efficiency gap with peers by hiring Dave Bates from Old Dominion as the new COO."
They added, "We still believe XPO will have to outperform peers on OR and yield in order to validate the LTL 2.0 strategy, but after this key hire there should be more confidence that the company can start to narrow the profitability gap with peers, although we recognize it won’t happen in only a few quarters."