UPDATE: Morgan Stanley Upgrades XPO Logistics (XPO) to Overweight

July 8, 2022 3:06 AM EDT
Get Alerts XPO Hot Sheet
Price: $42.33 --0%

Rating Summary:
    27 Buy, 2 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 6 | Down: 5 | New: 14
Join SI Premium – FREE
(Updated - July 8, 2022 4:57 AM EDT)

Morgan Stanley analyst Ravi Shanker upgraded XPO Logistics (NYSE: XPO) from Equalweight to Overweight with a price target of $75.00.

The analyst comments "We are upgrading XPO from EW to OW. Our PT remains $75, with over 50% upside to our PT. We model normalized EPS (for the combined company ahead of the spin later this year) of $5 and applying a 15-16x normalized PE (3-4x discount to LTL LT average for idiosyncratic reasons, which is a conservative assumption) gives us over 50% upside to the current stock price. Put another way, the stock appears to be reflecting steady state earnings would get cut in half, which can only happen if macro is significantly worse than our base case or execution deteriorates — both of which is unlikely, in our view. For now, we are modeling a freight slowdown for XPO (similar to other companies in our coverage) with 2023 EBIT -10% y/y (adj for IM sale) and 22% below consensus on EPS, and the valuation is still very attractive on our numbers. This makes current risk-reward look very favorable even in a potential recession scenario – with limited near-term downside and potential for significant upside, especially if idiosyncratic catalysts deliver."

For an analyst ratings summary and ratings history on XPO Logistics click here. For more ratings news on XPO Logistics click here.

Shares of XPO Logistics closed at $48.46 yesterday.

You May Also Be Interested In

Related Categories

Analyst Comments, Hot Upgrades, Upgrades

Related Entities

Morgan Stanley, Earnings