Hub Group's Acquisition Of Forward Air Final Mile Can Be Accretive By 20 Cents In FY24 Earnings: Analyst

Benchmark analyst Christopher Kuhn reiterated the Buy rating on Hub Group, Inc. HUBG, raising the price target to $98 from $85.

HUBG recently announced the acquisition of Forward Air Final Mile (FAFM) from Forward Air Corporation FWRD.

According to the analyst, this fits within HUBG’s strategy of increasing the mix of non-asset businesses, boosting the cadence of acquisitions, and integrating them at a quicker pace than over the last few years.

At the same time, it helps Forward Air’s goal of streamlining its portfolio to focus on expedited LTL.

The development gives HUBG exposure to the appliance and installation business, which they can cross-sell to current customers, some of whom they do not provide final mile services today.

According to the analyst, HUBG sees a large pipeline of opportunities to cross-sell appliances to current customers who do not use their Final Mile service or can now use the company for appliance and installation on top of their current FMS offering. 

At the same time, HUBG can also cross sell their services to FAFM customers.

The acquisition is expected to be accretive to GAAP and cash EPS in 2024 prior to cross-sell and operational synergies.

Per Kuhn, this acquisition fits nicely within HUBG’s portfolio, given seamless integration with HUBG’s current Final Mile business, and sees about $0.20 accretion to 2024 estimate and more in 2025. 

Price Action: HUBG shares are trading higher by 0.97% to $92.78 on the last check Friday.

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