XPO (XPO) PT Raised to $95 at Morgan Stanley

Morgan Stanley analyst Ravi Shanker raised the price target on XPO (NYSE: XPO) to $95.00 (from $90.00) while maintaining a Underweight rating.

The analyst comments "Remain UW. XPO’s 4Q was a 11/13% EBIT beat vs. MSe/cons. but included a $13 mm real estate gain (8c) adjusted for which, the EBIT beat was 3%/5% vs. MSe/cons. LTL EBIT was 2% above MSe and in-line with cons. Mgmt. continued to focus on idiosyncratic initiatives on both revenues and productivity, highlighting the push into regional Shippers (10,000 regional customers gained and local shipments are now 25% of revenue vs. 20% before) and premium services (up to 12% from <10% before with an opportunity to >15% over time). In keeping with the relative optimism that we have heard from peers so far (see here, here, and here), mgmt. noted that Jan tonnage trends were running better than Dec, though we note that the comp for Jan (and Feb) is quite easy and Jan looks similar to Dec on a 2- year stack. On the OR side, mgmt. pointed to sequential improvement vs. extant cons./MSe looking for a 50bps decline. As such, there should be some upside to 1Q numbers, which could modestly lift the full year as well. However, the stock is pricing in much more than this. In the past year, cons. EPS has declined 25%/22%/10% for 4Q25/1Q26/FY26 respectively, and yet the stock is up 42% in the same period. At $200, the stock is pricing in $10 EPS at 20x PE (at the high end of the historical LTL range) despite extant cons. FY27 EPS at $5.47. XPO is trading at ~40x extant MSe FY27 EPS, which makes risk-reward hard to justify in our view, even if mgmt. is doing all the right things and making incremental idiosyncratic gains. We remain cautious on elevated LTL expectations given excess industry capacity and rising competition from private carriers, new entrants, brokers, and TLs. Following 4Q, our FY26/27/28 EPS moves to $4.29/$5.27/$6.28 from $4.10/$5.02/ $6.05 and extant cons. of $4.27/$5.47/$6.90. Our PT moves to $95 from $90."

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