Market Overview

BofA: Buy The Dip In XPO Logistics

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BofA: Buy The Dip In XPO Logistics

XPO Logistics (NYSE: XPO) received a vote of confidence from Bank of America Merrill Lynch Tuesday amid a pullback in the stock. 

The Analyst

Analyst Ariel Rosa upgraded XPO Logistics from Neutral to Buy and lowered the price objective from $111 to $105.

The Thesis

XPO shares are down 25 percent from all-time highs in September, and this represents a good buying opportunity, Rosa said in the upgrade note. (See the analyst's track record here.) 

“We believe the recent pullback now offers a more attractive risk-reward balance, despite our concerns that the macro environment has deteriorated over the past several months and cyclical risks remain material."

XPO has downside protection due to its diversified business lines and multiple revenue streams in the case of an economic slowdown, Rosa said. 

“The turnaround of its less-than-truckload business, its flexibility in growing and adapting its brokerage business amidst structural change and its skill in opportunistically growing in contract logistics and last mile are encouraging indications of its resiliency,” the analyst said. 

XPO has reduced its net debt from more than 4x EV/EBITDA to a manageable 2.6x, according to BofA. A cyclical downturn in trucking is possible given the recent decline in the sell-side firm's truckload indicator, Rosa said.

XPO is well-positioned  for accretive M&A given management’s interest, the pullback in valuation, and improving cash flow and leveraging metrics, the analyst said. 

Price Action

XPO shares were up 1.98 percent at $84.54 at the time of publication Tuesday. 

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Photo courtesy of XPO Logistics. 

Latest Ratings for XPO

DateFirmActionFromTo
Feb 2019Credit SuisseMaintainsOutperformOutperform
Feb 2019SunTrust Robinson HumphreyMaintainsBuyBuy
Feb 2019Morgan StanleyDowngradesOverweightEqual-Weight

View More Analyst Ratings for XPO
View the Latest Analyst Ratings

Posted-In: Ariel Rosa Bank of America Merrill LynchAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga

 

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