In this final part of our series on XPO Logistics’ (XPO) 2Q17 earnings, let’s turn to the analysts. XPO is covered by 19 analysts, who were surveyed by Thomson Reuters. Their consensus rating for XPO is 1.8, which represents a “buy.”
Six analysts (31.6%) have a “strong buy” for XPO stock, and 11 analysts (57.8%) have given it a “buy” recommendation. Two analysts (10.6%) have recommended a “hold” for the stock, and none of them have recommended a “sell.”
Peer group’s recommendations
XPO’s primary competitor, United Parcel Service (UPS), has a “buy” recommendation from six of the 27 analysts covering the stock. FedEx (FDX) has a “buy” recommendation from 22 of the 27 analysts tracking FDX stock. Another key player in the less-than-truckload space is Old Dominion Freight Lines (ODFL), which has a “buy” recommendation from six of the 15 analysts covering the stock. YRC Worldwide (YRCW), XPO’s rival, has a “buy” recommendation from three of the six analysts tracking the stock.
If you prefer holding transportation stocks, you can consider the iShares US Industrials (IYJ), which has 5.6% of its portfolio dedicated to Class I railroads.
Why are analysts bullish on XPO?
XPO Logistics has quickly emerged as a dominant force in the US trucking sector. The company boasts aggressive expansion plans in the next one to two years. XPO’s thrust on inorganic growth has been driven by its ambitions to be a formidable player in the less-than-truckload space.
The company’s EPS (earnings per share) rose much higher year-over-year in 2Q17. That indicates that the company’s integration and synergies from acquisitions are on the right path. That’s also corroborated by the fact that XPO Logistics has an additional $8.0 billion appetite for acquisitions.
The company’s 2Q17 conference call transcript suggests that it’s expanding the network to ride on the e-commerce boom. Research firm eMarketer.com has forecast that global e-commerce revenues will rise 100% to $4.0 trillion by 2020, from ~$2.0 trillion in 2016. Geography-wise, XPO has a good presence outside the United States with a well-diversified global business.
In a nutshell, XPO Logistics appears to be a strong beneficiary of the current online shopping trend, which is expected to grow phenomenally over the next three to four years. Barring some hiccups in the short term, XPO stock could take off in the long term.