XPO Logistics Analyst Slashes Price Target By 34%; Says Brokerage Separation Simplifies Story At XPO

  • Raymond James analyst Patrick Tyler Brown reiterated an Outperform rating on the shares of XPO Logistics Inc XPO and lowered the price target from $70 to $46.
  • The rating follows the spin-off of the company’s brokerage business (RXO) which was completed on Nov. 1, leaving the N.A. LTL (Less Than Truck load) business and the European transport business as one entity.
  • The analyst believes the separation simplifies the story at XPO as it is now effectively a pure-play LTL, driving multiple expansion in time.
  • Brown’s primary takeaway from 3Q22 results within N.A. LTL was the sequential acceleration in tonnage throughout the quarter, with October continuing this trend with tonnage up +3% y/y. 
  • He notes that in recent tonnage updates from LTL carriers that sequential declines occurred from October into November, something that he is certainly keeping an eye on.
  • The analyst has been encouraged by management’s reinvigorated tone and newly unveiled “LTL 2.0" plan made over the past several months.
  • The plan includes strategies to drive market share, optimize pricing, and improve efficiencies.
  • Tangible benefits from a slew of tech enhancements can be seen through damage frequency being at its lowest level since 2016 and employee engagement/satisfaction at record highs.
  • Brown is excited about the potential of what can be improved upon at XPO, particularly now that LTL is the core focus.
  • He views XPO Logistics as a solid pure-play LTL carrier that has greatly simplified their story given the spin-offs of their logistics and brokerage segments over the last couple of years.
  • That said, this will create more of a focus on LTL, with significantly more investment compared to years past.
  • Moreover, the diversity of these investments should prove fruitful from a volume, pricing, and productivity perspective, helping to close the gap between LTL peers.
  • Price Action: XPO shares are trading lower by 4.64% at $36.37 on the last check Monday.
  • Photo Via Company
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