It’s time to be cautious on XPO , Bank of America says. Analyst Ken Hoexter downgraded shares of XPO to neutral from buy, and lowered his price target, saying the logistics company will have to contend with a tougher outlook for less-than-truckload shipping. LTL refers to the transportation of smaller freights that typically don’t require the use of an entire trailer. “XPO is shifting to a pure play LTL carrier, following the spin its Brokerage/Last Mile segment, and plans to sell European Transport segment (it already sold Intermodal ops),” Hoexter wrote. “Given the benefits to LTL from ecommerce growth, and XPO’s focus to improve ops, it should unleash trapped value. However, its efforts on unlocking value is balanced by a decelerating freight environment for LTL carriers,” Hoexter added. Shares of XPO declined more than 27% in 2022 as the logistics company tried to improve its operating ratio, which shows how well a company is generating revenue while managing expenses. That is expected to be a challenge for new CEO Mario Harik as he deals with a worsening macro environment. “We target XPO shipments/day to fall 3% year-year in 4Q22e and 2023e,” Hoexter wrote. “LTL volumes are increasingly challenged, evident in ODFL and SAIA mid-quarter updates where daily tonnage for Oct/Nov was -9%/-7% and -8%/-9% year-year, respectively. FedEx also saw accelerating declines in LTL volumes (see F2Q23 Note) with shipments down 11% in Nov from -3% in June.” The analyst roughly halved his price target, down to $35 from $60, implying shares have just 5% upside from Friday’s closing price. —CNBC’s Michael Bloom contributed to this report.
