KeyBanc Turns Bullish On XPO Logistics: 'Priced For Improvement'

Shares of XPO Logistics Inc XPO have lagged peers, and there is upside to the stock in a cyclical recovery, according to KeyBanc Capital Markets.

The XPO Logistics Analyst: Todd Fowler upgraded XPO Logistics from Sector Weight to Overweight with a $110 price target. 

The XPO Logistics Thesis: The company’s improving fundamentals may become fully reflected in its performance in the upcoming quarters, Fowler said in the Wednesday upgrade note. (See his track record here.)

The second-quarter results were not significantly driven by benefits from XPO Logistics’ improving fundamentals, the analyst said.

Instead, the results were impacted by customer shutdowns in logistics and the company’s high auto and industrial exposure in the less-than-truckload segment, he said. 

“With broader restart activity more fully materializing and indications of improving industrial and automotive end markets, we expect sequential improvement potentially ahead of the company-wide HSD revenue declines in early July.”  

The sequential revenue growth and the company’s efforts to cut costs and lower pandemic expenses may take third-quarter EBITDA higher than the current guidance of “at least” $350 million, Fowler said. 

XPO Logistics has appointed a chief transformation officer with multinational corporation experience. With this, profit improvement initiatives could go beyond the previously targeted range of between $700 million and $1 billion, the analyst said.

XPO Price Action: Shares of XPO Logistics were trading 6.5% higher at $86.22 at the time of publication Wednesday. 

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