RXO Analyst Impressed With Tech-Enabled Growth, But Hesitant On Industry Headwinds - RXO (NYSE:RXO)

Raymond James analyst Felix Boeschen initiated coverage on RXO Inc RXO with a Market Perform rating on the shares.
Following the spin-off from XPO Logistics, Inc.XPO, the analyst is assuming coverage of RXO, XPO’s technology enabled brokerage platform with exposure in truckload, heavy-goods Last Mile, forwarding and managed transportation.
Boeschen was impressed with RXO’s technology, the asset-light business model/strong FCF generation and RXO’s above-market growth prospects.
But he remains hesitant on the cyclical freight backdrop inclusive of likely industry volume headwinds in key service offerings as well as decelerating contractual truck rates that could put pressure on 1H23 buy/re-sell spread dynamics in RXO’s flagship truck business.
Longer-term, he ponders if RXO’s healthy balance sheet, strong FCF generation and minimal capex requirements could allow for incremental capital allocation upside to out-year targets in the form of substantive share buybacks and/or M&A.
He primarily sees RXO as a tech-enabled growth story in the highly fragmented for hire truckload brokerage market.
Also Read: XPO Logistics Analyst Slashes Price Target By 34%; Says Brokerage Separation Simplifies Story At XPO
Price Action: RXO shares are trading lower by 4.12% at $17.92 on the last check Monday.
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