Baird: Three Catalysts That Could Help Forward Air Deliver

Freight and logistics company Forward Air Corporation FWRD has secured the top-notch rating from Baird, with the research firm suggesting that it would be a buyer at current levels.

The Analyst

Baird analyst Benjamin Hartford upgraded shares of Forward Air from Neutral to Outperform and increased his price target from $61 to $70.

The Thesis

Expedited less-than-truckload, EBIT margin expansion, the broadening of expedited LTL addressable market and incremental capital deployment are the three chief catalysts behind the upgrade, Hartford said in a Thursday note. (See the analyst's track record here.) 

Industry pricing growth and added network density in 2018 support EBIT margin expansion at Forward Air's core expedited segment, driving positive operating leverage in 2018 and 2019, the analyst said.

Hartford also said he views rising crude oil and diesel prices as a tailwind to expedited LTL margins and earnings per share in 2018, as Forward Air more than recovers the cost of fuel through surcharges.

The company, which boasts a 40-50 percent share of the expedited ground airport-to-airport market, could build traction in expanding its addressable market beyond its core customers, Hartford said.

This would provide provide an incremental margin opportunity and serve as an additional channel of revenue growth in the segment over time, he said. 

Baird maintained its above-consensus 2018 and 2019 estimates, although it did not rule out the potential for upward EPS estimate revisions this year. 

The Price Action

Forward Air shares have soared about 24 percent over the past year.

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