XPO Logistics's Q2 Could Be Its First Profitable Quarter, Says Oppenheimer

The company is set to report its second-quarter earnings Wednesday.

Analyst Scott Schneeberger noted that the company, in a mid-July update to investors, reiterated its 2016 free cash flow guidance and EBITDA guidance for the period from 2016 through 2018. Notwithstanding softness in the U.S. freight business, the analysts expects the company's European transportation business to have fared well.

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The multiple contract wins announced by the company in recent quarters have led the analyst to believe that it is witnessing solid trends across its Logistics business. Oppenheimer also noted that the company underplayed the Brexit risk, stating that 90 of its EBITDA from the U.K. is from more stable longer-term contracts.

As such, Oppenheimer maintained its estimates for the period from 2016 to 2018. The firm's current valuation of $33 for the shares of the company is based on 6.9 times EV/EBITDA on its 2017 EBITDA. As the Con-way synergies kick in, economic sentiment improves, margins expand, free cash flow builds and financial leverage declines, the firm sees potential for multiple expansion.

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