WERN - Knight-Swift Werner Enterprises cut to Hold at Credit Suisse

2023-05-17 07:53:02 ET

Credit Suisse told clients it has “become increasingly cautious on the trucking cycle as low rates persist,” leading its analysts to downgrade of multiple names.

“We advocate trimming exposure; we lower our EPS estimates across the board and downgrade Knight-Swift ( KNX ) and Werner ( WERN ) to Neutral,” the bank’s analysts stated. “In our view, the market has already priced in a meaningful upturn in rates and a double-digit recovery in earnings for 2024, leaving limited room for near-term upside and moderate risk of a 10-15% pull-back from current levels. While we stop short of a view that trucking stocks are significantly overvalued, the risk/reward does not appear compelling from our perspective.”

As such, the team stepped to the sideline on each stock due to a lack of near-term catalysts and valuation concerns.

That said, the less-than-truckload space may offer opportunity, according to the analysis. Per the Swiss bank’s analysts, the industry may be at an inflection point which could support the likes of XPO ( XPO ) and ArcBest ( ARCB ).

“We see opportunity for Saia ( SAIA ), XPO, and to a lesser extent, ARCB to pick up volume, while we see [Old Dominion Freight Line] ( NASDAQ: ODFL ) as vulnerable,” the analysts concluded. “The bull case on ODFL is now predicated on other carriers failing to provide adequate service. While ODFL has been a standout for years, we now see its business model at risk, and believe EPS growth will be below historical levels, posing risk to the stock given its premium valuation.”

Deutsche Bank recently took a contrastingly positive view of Old Dominion .

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