UPDATE: BMO Capital Markets Initiates Coverage on Hub Group with Market Perform Rating, $42 PT on Good Market Position, Margin Pressure Vulnerabilities

In a report published Tuesday, BMO Capital Markets analyst Fadi Chamoun initiated coverage on

with a Market Perform rating and $42.00 price target. In the report, BMO Capital Markets noted, “Hub Group is the second-largest player in the high-growth intermodal sector and enjoys numerous competitive advantages relative to smaller intermodal marketing companies, including operating density, company-controlled drayage operations and strong rail relationships. In our view, Hub Group also has significant opportunities to cross-sell its other services (truck brokerage, logistics) into the company's existing accounts. Furthermore, we believe the company is well positioned to be opportunistic in pursuing acquisitions. Notwithstanding the above, we believe the misalignment between intermodal bid season and the timing of rail pricing adjustments leaves the company vulnerable to margin pressure. While we expect the company will generate robust earnings growth, the upside appears to be captured in its current valuation. We are initiating coverage of Hub Group with a Market Perform rating.” Hub Group closed on Monday at $39.26.