In a recent analysis, Truist has adjusted its price target for RXO Inc. (RXO, Financial), reducing it from $24 to $19, while maintaining a Buy rating on the stock. This revision comes as part of a larger report on the Transportation & Logistics sector, which has been grappling with a freight recession lasting over two and a half years, according to the analyst Lucas Servera.
The report highlights that despite facing a prolonged period of challenges, the sector has managed to maintain stability in its overall industry tonnage index through 2024 and into 2025. This stability is attributed to ongoing growth in U.S. GDP, retail sales, and e-commerce activities, which have helped sustain demand for goods transportation. However, the firm notes significant downward pressure on pricing within the truckload market.
Truist's decision to revise the price target reflects a cautious outlook due to the muted macroeconomic environment impacting the sector. Nevertheless, the consistent demand for transportation services offers a silver lining, suggesting underlying resilience amid current market conditions.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 17 analysts, the average target price for RXO Inc (RXO, Financial) is $19.94 with a high estimate of $25.00 and a low estimate of $12.00. The average target implies an upside of 48.81% from the current price of $13.40. More detailed estimate data can be found on the RXO Inc (RXO) Forecast page.
Based on the consensus recommendation from 21 brokerage firms, RXO Inc's (RXO, Financial) average brokerage recommendation is currently 2.9, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
RXO Key Business Developments
Release Date: February 05, 2025
- Total Revenue: $1.7 billion in the fourth quarter.
- Gross Margin: 15.5% in the quarter.
- Adjusted EBITDA: $42 million, with a margin of 2.5%.
- Adjusted Earnings Per Share (EPS): $0.06.
- Brokerage Revenue: $1.3 billion, representing 75% of total revenue.
- Brokerage Gross Margin: 13.2%.
- Complementary Services Revenue: $431 million, 25% of total revenue.
- Complementary Services Gross Margin: 21.1%.
- Last Mile Revenue: $290 million, with stops growing by 15% year-over-year.
- Managed Transportation Revenue: $141 million, down 8% year-over-year.
- Adjusted Free Cash Flow: $6 million, representing a 14% conversion from adjusted EBITDA.
- Cash on Balance Sheet: $35 million at the end of the quarter.
- Annualized Cost Synergies: Expected to be at least $50 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RXO Inc (RXO, Financial) is ahead of schedule with the integration of Coyote Logistics, expecting at least $50 million in annualized cost synergies.
- The company's Managed Transportation sales pipeline has grown to nearly $2 billion, indicating strong future potential.
- RXO Inc (RXO) achieved a 10% sequential increase in brokerage volume from the third quarter, showcasing effective execution.
- Last Mile stops grew by 15% year-over-year, reflecting strong demand and operational efficiency.
- The company has made significant structural improvements, enhancing its long-term earnings power and free cash flow potential.
Negative Points
- RXO Inc (RXO) is operating in a soft freight market, impacting gross profit per load and overall financial performance.
- The first quarter is expected to see a mid to high single-digit decline in combined brokerage volume year-over-year.
- Coyote's historical gross margin and EBITDA margin are lower than RXO Inc (RXO), affecting overall profitability comparisons.
- Managed Transportation revenue declined by 8% year-over-year, primarily due to lower automotive volume.
- The company anticipates a larger-than-normal seasonal decline in Last Mile performance into the first quarter.
