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In a broad evaluation of transportation sector prospects for 2023, Bank of America analyst Ken Hoexter shifted his stance on numerous trucking names.
He defined that an anticipated optimistic flip in truckload dynamics prompts a double-upgrade of each Schneider National (NYSE:SNDR) and Werner Enterprises (NASDAQ:WERN) from Sell-equivalent scores to Buy.
“With a building Demand base and historically attractive valuation levels, we turn more positive on select truckload carriers,” he wrote on Tuesday. We count on truckload charges to backside as we transfer via bid-season, with contract charges reset decrease and spot holding close to its price flooring.”
By distinction, he provided a extra downbeat perspective on less-than-truckload operators. Hoexter defined that decelerating volumes and tighter spending habits amongst shippers have already been telegraphed in current earnings releases.
“As highlighted by FedEx (FDX) Freight during FDX’s F2Q23 Earnings, shipper orders are moving from premium freight services (such as Priority) to more budget-friendly options (Economy, Deferred) as the macroeconomic environment further slows,” he famous. “FedEx Freight also expected moderating fuel prices to weigh on yields as fuel surcharges decreased. We view this in the backdrop for the LTL sector and expect both volume and pricing to decelerate in 2023 across all operators.”
As such, XPO (NYSE:XPO) was downgraded to Underperform from Neutral. Additionally, CH Robinson (NASDAQ:CHRW) was referred to as out as a reputation due to endure from freight deceleration, fielding a downgrade to Sell-equivalent as properly. Elevated debt ranges, administration shifts, and squeezed margins had been additionally cited as points prompting a bearish outlook on the inventory.
Read extra on current government adjustments at CH Robinson.
