UPDATE: Credit Suisse Starts XPO Logistics (XPO) at Outperform
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Credit Suisse analyst Ariel Rosa initiates coverage on XPO Logistics (NYSE: XPO) with a Outperform rating and a price target of $65.00.
The analyst comments "We initiate coverage of XPO Logistics with an Outperform rating and $65 target price. XPO’s recent struggles are reflected in its 40% share price decline over the past year and its forward multiple at just 9x forward earnings. This defies CEO Brad Jacobs’ strong track record of driving shareholder returns, as we believe that many investors have been confused by XPO’s evolving corporate structure and frustrated by its inconsistent execution. Nevertheless, the company continues to have among the best margins in the LTL industry and benefits from its considerable scale. It trades at a sizable discount to best-in-class LTL peers SAIA (at 14.7x P/E) and ODFL (at 22.4x P/E). The core structure of its LTL operations resembles its more richly valued peers in terms of its national network, its scale, its strong customer relationships, and its non-union labor force. However, XPO has struggled to demonstrate comparable volume growth to its best-in-class peers, which we believe is a major factor driving its discount. It has recently stepped up its attempts to resume volume growth, with plans to add 900 net doors (a 6% increase to its network) by the end of 2023. We believe XPO could see a re-rating in its P/E multiple as it approaches an end to its era as a conglomerate with the pending spin-out of its Brokerage business, as well as through paying down debt and demonstrating more consistent LTL results."
Shares of XPO Logistics closed at $50.18 yesterday.
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