On Monday, CFRA upgraded XPO Logistics , Inc. (NYSE:) stock rating from Hold to Buy and increased its price target to $173 from $145. The upgrade reflects CFRA’s confidence in the company’s financial outlook, citing key factors such as strong forecasted free cash flow (FCF) growth and margin expansion. With a current market capitalization of $16.4 billion and trading at $141.12, XPO has demonstrated strong momentum, delivering a 68% return over the past year. InvestingPro analysis indicates the stock is trading above its Fair Value, with analyst targets ranging from $85 to $181.
The research firm set its 12-month price target at $173, which is based on an average of a 32 times forward price-to-earnings (P/E) multiple on their 2025 earnings per share (EPS) estimate and a discounted cash flow (DCF) model. The DCF model assumes a terminal growth rate of 2.5%, a weighted average cost of capital (WACC) of 8.5%, and a 10-year FCF compound annual growth rate (CAGR) of 20.1%, leading to a valuation of $198. Currently, XPO trades at a P/E ratio of 44.2x, reflecting the market’s high growth expectations.
CFRA’s analysts maintained their 2024 EPS estimate at $3.64 and the 2025 estimate at $4.61, while introducing a 2026 EPS estimate of $5.60. Their optimistic outlook is partly based on the expectation of strong FCF in the upcoming years, driven by anticipated margin expansion after XPO reported negative FCF in the fiscal year 2023.
The firm believes that the Federal Reserve’s recent decision to implement fewer rate cuts in 2025 will serve as a primary indicator of demand trends for trucking companies. Despite this macroeconomic backdrop, CFRA’s analysts are endorsing a Buy rating for XPO shares, pointing to the company’s operational efficiencies, such as its in-sourcing plan, and the forecasted positive FCF generation as reasons for their positive stance.
In other recent news, XPO Logistics has been the subject of several analyst adjustments.
JP Morgan raised its price target for XPO to $146 from $142, citing strong third-quarter performance and promising momentum heading into 2025. TD Cowen also maintained a Buy rating on XPO and increased the price target to $150 from $137, highlighting the company’s operational leverage and ability to generate free cash flow.
Meanwhile, BofA Securities reduced its price target for XPO from $175 to $171 but kept a Buy rating. This adjustment followed a mid-fourth-quarter update showing a decrease in November Tons/Day by 4.0% year-over-year. BMO Capital Markets also reiterated an Outperform rating on XPO shares, expressing confidence in the company despite a subdued LTL market.
These adjustments come as XPO Logistics reported third-quarter revenue of $2.1 billion, marking a 4% increase year-over-year. Adjusted EBITDA rose 20% to $333 million, and the adjusted diluted EPS climbed by 16% to $1.02. These figures surpassed analyst expectations, prompting several firms to raise their price targets for XPO.
Despite the challenging market, XPO Logistics is projecting interest expenses between $225 million and $230 million, and an adjusted effective tax rate of 24%-25% for the full year 2024.
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