XPO Logistics Initiated Outperform At JPMorgan; Joins 10+ Bullish Firms

Shares of XPO Logistics Inc XPO, a transportation and logistics company that provides supply chain solutions, has lost more than 40 percent of its value over the past year, but many Wall Street analysts remain optimistic on the stock's outlook.

Brian Ossenbeck of JPMorgan initiated coverage of XPO Logistics on Monday with an Overweight rating and $40 price target. The analyst sees the company benefiting from organic growth and significant cost cutting opportunities and a management team.

Ossenbeck is expecting XPO Logistics to show a mid-single-digit organic top-line growth as the company will see higher e-commerce volumes, incremental cross-selling opportunities and adoption of outsourced logistics by customers looking to reduce their capital expenditures while improving efficiency.

Ossenbeck continued that XPO Logistics has spent the past five years acquiring companies, but now, the management team is focused on cost cutting, integration and debt reduction and should show a profit this year.

Related Link: Avondale Partners Likes XPO Logistics' Defensive Appeal

Ossenbeck also acknowledged the stock's poor performance over the past year and investor sentiment suffered after the Con-way deal. As such, the stock is now a "show me" story given the "persisting discount."

However, the analyst stated that the stock's valuation "seems to give insufficient credit" to its asset-light business model that generates approximately 60 percent of its operating profit.

"We see attractive upside in XPO using our SOTP [sum of the parts] valuation and expect the stock can re-rate higher with improving operations and lower leverage," Ossenbeck wrote.

Wall Street's History Of Bullishness

Wall Street analysts have remained bullish on XPO Logistics since at least March of 2015.

• March 31, 2015 - Analysts at Oppenheimer maintained an Outperform rating.
• May 7, 2015 - Analysts at Stifel Nicolas maintained a Buy rating.
• May 11, 2015 - Analysts at Barclays maintained an Overweight rating.
• June 19, 2015 - Analysts at William Blair initiated coverage with an Outperform rating.
• August 7, 2015 - Analysts at Stifel Nicolas maintained a Buy rating.
• August 11, 2015 - Analysts at Deutsche Bank maintained a Buy rating.
• September 28, 2015 - Analysts at Barclays maintained an Overweight rating.
• September 30, 2015 - Analysts at Oppenheimer maintained an Outperform rating.
• January 11, 2016 - Analysts at Deutsche Bank maintained a Buy rating.
• January 12, 2016 - Analysts at KeyBank maintained an Overweight rating.
• April 14, 2016 - Analysts at Citigroup maintained a Buy rating.
• May 17, 2016 - Analysts at Buckingham initiated coverage with a Buy rating.

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