RXO Inc (RXO) Stock Forecast & Price Target

RXO Inc. has demonstrated resilience in its financial performance, with total revenue per load, excluding fuel, returning to flat year-over-year for the first time in the current cycle, and showing low single-digit growth by January, which supports expectations of higher contract rates for 2025. The ongoing integration of Coyote is exceeding expectations, with annual run-rate cost synergies now projected to reach $50 million, alongside a stable gross margin of 21.1%, reflecting 20 basis points year-over-year growth amid challenging market conditions. Additionally, RXO's Last Mile services have seen a significant increase in stop volumes, supporting its competitive position in the expanding big and bulky market, while overall growth in transportation volume, particularly with the boost from the Coyote acquisition, underscores a strong operational outlook.

RXO Inc is experiencing a decline in volume, with a 6% year-over-year drop on a pro forma basis, while unit gross profit fell short of expectations, reflecting underlying weaknesses in its core truck brokerage business. The segment gross margin was reported at 13.2%, which is 30 basis points lower than anticipated, and a structural margin squeeze is expected as rising buy rates are negatively impacting gross margins, particularly for the Coyote segment. Future earnings estimates have been revised downward due to anticipated gross margin pressures and typical seasonal weaknesses, leading to lower forecasts for 2025 EBITDA and EPS, compounded by factors such as share dilution from the Coyote acquisition.