TD Cowen upgrades RXO stock rating to hold on acquisition news

On August 10, 2023, TD Cowen upgraded RXO, Inc.'s stock rating from Sell to Hold, citing acquisition news. The investment firm also increased its price target for the stock from $17.50 to $30.25. Currently trading at $28.65, RXO has seen a 38% increase in stock price over the past week and an 87% growth over the previous six months.

The transaction involves C.H. Robinson Worldwide purchasing RXO at $30.25 per share, representing a 40 times EV/EBITDA multiple in 2026 or a synergized multiple of 13.2 times. RXO's current EV/EBITDA stands at 59, suggesting the stock is overvalued relative to its Fair Value. Although the company did not generate profits in the last twelve months, analysts anticipate profitability this year.

Management expects the acquisition to close in the first half of 2027. The combined market share for the businesses will reach around 20%, although it will remain in single-digit percentages for the for-hire market. Notably, RXO's two largest shareholders, holding approximately 38% of the float, support the transaction, as per their statements.

Despite the merger's complexities, including post-Montgomery landscape, auto liability risk, leverage, and customer overlap, TD Cowen expressed surprise, citing these factors. RXO recently reported adjusted earnings of $0.06 per share for Q2 2026, exceeding Wall Street's estimate of $0.04, with revenue hitting $1.8 billion and adjusted EBITDA surpassing high-end guidance.

RXO's improvements in truckload volume, gross profit per load, and spot activity contributed to these results. Citigroup upgraded RXO to a Market Outperform rating, reflecting positive industry fundamentals and earnings that exceeded expectations. Wells Fargo set a price target of $23.00 for RXO, maintaining an Equal Weight rating due to improved brokerage dynamics in Q3.

While TD Cowen's downgrade to a Sell rating contrasts with these positive sentiments, it highlights a range of analyst opinions on RXO's future performance. This article was supported by AI and reviewed by an editor for accuracy.