Analysts at UBS turned bearish on
Echo Global Logistics, Inc.ECHO, a small-cap provider of technology-enabled transportation and supply chain management solutions, after the stock has
already lost 30 percent since the start of 2017. The firm's Thomas Wadewitz downgraded Echo's stock rating from Neutral to Sell with a price target slashed from $22 to $12 after the
company's earnings report
included some concerning data points.
Echo's second-quarter report along with management's near-term outlook shows that the company is growing at a slower pace versus the overall market in terms of truckload volume, Wadewitz explained in a research report. Also, during the company's conference call management said it won't see any meaningful truckload volume growth over the next few quarters and it is also unclear if any
synergies from the Command acquisition
will play out as expected.
"Better execution in the market appears necessary but it is unclear whether the catalyst is people, new technology or perhaps entering a period of less intense competition," Wadewitz added.
Finally, Echo's stock is trading at a P/E multiple of around 33x on the analyst's one year forward EPS estimate. And multiple may be unjustified amid a "more muted revenue growth outlook" and only expectations for a "modest" gross margin improvement. As such, a new $13 price target is based on a 22x P/E multiple on the analyst's new 2018 EPS of $0.60 (down from a previous $1.00 per share estimate).
At last check, shares of Echo Global Logistics were down 16.14 percent at $14.55.
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