Truist: 'C.H. Robinson Worldwide (CHRW) to Acquire RXO; Buying Scale While Unlocking Margin Opportunity'

Truist Securities analyst Lucas Servera reiterated a Buy rating and $215.00 price target on C.H. Robinson Worldwide (NASDAQ: CHRW).

The analyst commented: "CHRW To Acquire RXO; Buying Scale While Unlocking Margin Opportunity; This morning, CHRW announced a definitive agreement to acquire RXO (Buy) in a cashand-stock transaction with an implied value of ~$5.8B, or $30.25/share. Under the terms of the agreement, RXO shareholders will receive $17.25 in cash and 0.0856 CHRW shares for each RXO share, representing a 29% premium to RXO's 10/2 closing price. Approximately 57% of the consideration will be paid in cash and 43% in CHRW shares, with RXO shareholders expected to own ~11% of the combined company following the close. CHRW plans to finance the cash portion with new debt, and the transaction is expected to close in 1H27, subject to customary regulatory approvals and RXO shareholder approval.

We view the transaction as offering significant greater earnings upside than the announced $300mm cost synergy target alone may suggest. RXO currently generates ~$7B of annual revenue but operates at 0% operating margin, compared with ~6% at CHRW. If CHRW can successfully deploy its Lean AI operating model and ultimately bring RXO's profitability in line with its own, a 6% margin on RXO's existing revenue base would imply ~$400mm+ of operating income. On our simplified assumptions, this could support ~$1.25-$1.50 of incremental EPS after financing costs, suggesting pro form earnings power could reach ~$8.50-$10.00 share over time, or closer to ~$11+ EPS post synergies."

For an analyst ratings summary and ratings history on C.H. Robinson Worldwide click here. For more ratings news on C.H. Robinson Worldwide click here.

Shares of C.H. Robinson Worldwide closed at $140.61 yesterday.

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