Evercore ISI Upgrades XPO (XPO) to Outperform

Evercore ISI analyst Jonathan Chappell upgraded XPO (NYSE: XPO) from In Line to Outperform.

The analyst comments "If Alan Greenspan was the Governor of Exuberance, we must have been First Lieutenant as we’ve consistently warned about potential demand landmines to the transportation sector as well as frothy valuations early in the cycle. Now we are the ones being told “don’t get over your skis” by the corporate community as headline pricing strength does not quite translate directly to earnings…yet. The 2Q earnings season should be an interesting one as optimism regarding a cyclical upturn has come to a boil (even “permabears” like us acknowledge the exceptional supply-side impact on the markets and are materially raising estimates again) and most stocks had been priced to perfection up until very recently. But what happens if 2Q26 EPS are not gangbusters, yet the promise of a cyclical earnings inflection is pushed to the right again? Although we now stand above average Street forecasts nearly across the board (see pages 16-18, 40), there are some “highs” out there that may be over-indexing to spot market strength. We believe most of the froth lies in the TL space, and that sector is where in-line prints probably present the most risk. On the other hand, LTLs have given back 12-15% of recent highs in the last few weeks alone, which we attribute to the nearly 40% pullback in oil prices and an unwind of the “LTLs make money on fuel” trade. However, although LTL 2Q upside also may not be as great as some bulls expect, volumes and weight are beginning to accelerate and the EPS growth rate of change is likely to take the next leg higher starting in 3Q, and that’s exactly when you want to be buying the sector, with the end-of-quarter pullback providing even more attractive entry points. Indeed, we are upgrading ODFL, SAIA, and XPO to Outperform from In Line. We are also upgrading WERN to In Line from Underperform as the TL rate cycle exceeds expectations on both magnitude and duration even this early in the upturn."

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

Shares of XPO closed at $205.29 yesterday.

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