UBS Maintains a 'Neutral' on Hub Group (HUBG); Wait Until Yields Inflect or Stock Pulls Back to Buy
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Price: $40.30 -3.24%
Rating Summary:
9 Buy, 16 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
9 Buy, 16 Hold, 1 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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UBS maintains a 'Neutral' on Hub Group (NASDAQ: HUBG) price target raised from $35 to $38.
UBS analyst says, "HUBG showed robust intermodal load growth, impressive control of comp and G&A costs, huge margin improvement at Mode, and an EPS beat in Q4. But all this may not matter if investors focus squarely on Hub’s Q4 gross margin, which - at 10.6% - is the lowest in the past decade. HUBG partly attributed the yield decline to a higher than expected increase in its rail costs relative to its own intermodal rates. Our concern is that Hub is in an inferior pricing position relative to JB Hunt, which has advantageous relationships with its main rail partners, and thus this yield squeeze is a secular story."
"Management has repeatedly said they plan to return Hub’s gross margin to “pre-recession levels” (12%+ in most years with a peak of 14% in 2007). However, until we see this upward trajectory take shape, we think the stock is likely to trade at a material valuation discount to its peer, JB Hunt (Nasdaq: JBHT) (HUBG current NTM PE 17.5x vs. JBHT 20x)."
For an analyst ratings summary and ratings history on Hub Group click here. For more ratings news on Hub Group click here.
Shares of Hub Group closed at $34.37 yesterday.
UBS analyst says, "HUBG showed robust intermodal load growth, impressive control of comp and G&A costs, huge margin improvement at Mode, and an EPS beat in Q4. But all this may not matter if investors focus squarely on Hub’s Q4 gross margin, which - at 10.6% - is the lowest in the past decade. HUBG partly attributed the yield decline to a higher than expected increase in its rail costs relative to its own intermodal rates. Our concern is that Hub is in an inferior pricing position relative to JB Hunt, which has advantageous relationships with its main rail partners, and thus this yield squeeze is a secular story."
"Management has repeatedly said they plan to return Hub’s gross margin to “pre-recession levels” (12%+ in most years with a peak of 14% in 2007). However, until we see this upward trajectory take shape, we think the stock is likely to trade at a material valuation discount to its peer, JB Hunt (Nasdaq: JBHT) (HUBG current NTM PE 17.5x vs. JBHT 20x)."
For an analyst ratings summary and ratings history on Hub Group click here. For more ratings news on Hub Group click here.
Shares of Hub Group closed at $34.37 yesterday.
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