XPO Logistics: The Road To $1B EBITDA

In a report published Monday, Credit Suisse analyst Allison M. Landry maintained an Outperform rating on XPO Logistics Inc XPO, with a price target of $60, saying that their scenario analysis implies a base case of more than $1B EBITDA in 2017.

In the report Credit Suisse noted, "We updated the EBITDA/M&A scenario analysis that we first highlighted in our May 4 note A Logistics Juggernaut (new and improved interactive model available upon request). We arrived at the following potential targets in 2017 that XPO could unveil in the coming weeks:

• Base Case: EBITDA of $1.1B and gross revenue of $15.0B.
• Bull Case: EBITDA of $1.3B and gross revenue of $18.5B.
• Low Growth: EBITDA of ~$0.9B and gross revenue of $12.5B."

XPO announced that it had completed the private placement of $2.16B of senior notes. Moreover, the company raised $1.26B of equity through private placements with 15 institutional investors. "Importantly, despite the more than 25% dilution from the equity issuance (which was announced 6/1), the stock did not budge," Landry pointed out.

The EPS estimate for FY15 has been reduced from -$0.10 to -$0.30 to reflect modestly higher than anticipated dilution from the private placement of equity and a higher level of debt issuance. The EPS estimates for FY16 and FY17 have been reduced from $0.70 to $0.69 and from $1.28 to $1.19, respectively.