Benchmark raises Hub Group stock target to $40, maintains buy rating
Investing.com
Published May 13, 2025 10:23AM ET
On Tuesday, Benchmark analysts adjusted their outlook on Hub Group (NASDAQ:HUBG), raising the price target to $40 from the previous $33.13, while continuing to endorse the stock with a Buy rating. According to InvestingPro data, the stock appears slightly undervalued based on its Fair Value analysis, despite a significant 28% decline over the past six months. The increase follows Hub Group's first-quarter earnings report, which showed an adjusted earnings per share (EPS) of $0.44, marginally surpassing Benchmark's projection of $0.42 and FactSet's consensus of $0.43. Despite this, the company's revenue fell short of expectations by 6%, attributed to a mix of higher gross margins and slightly elevated adjusted operating costs.
The transportation firm managed to improve its operating margins by 40 basis points year-over-year in the first quarter, supported by a double-digit rise in intermodal volume growth in the Local East and Mexico regions, which benefited from the recent EASO acquisition. Overall, intermodal volumes increased by 8%, though the company faces challenges with its gross profit margin of 11.17%. Intermodal revenue per load declined by 12% due to a combination of factors including service mix, pricing, and fuel costs. The company maintains a moderate debt level with a debt-to-equity ratio of 0.29.
Hub Group's customers have shown varied responses to tariffs, with some accelerating inventory procurement while others adopt a more cautious stance. In response to the market conditions, Hub Group has revised its 2025 EPS guidance to a range of $1.75-$2.25, down from the previous $1.90-$2.40. This updated guidance aligns with Benchmark's estimate of $2.00, which is slightly below FactSet's $2.05 expectation.
Despite a 6% increase in intermodal volumes in April and no observed decline in May, Hub Group anticipates that reduced imports on the West Coast could impact intermodal volumes in the latter half of the second quarter. The current 90-day suspension of tariffs on Chinese goods may mitigate the potential slowdown in imports. InvestingPro analysis reveals that 10 analysts have recently revised their earnings expectations downward for the upcoming period, though the company is expected to remain profitable with a projected EPS of $1.83 for fiscal year 2025. For deeper insights into Hub Group's financial health and future prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers. Benchmark has consequently adjusted its EPS estimates for Hub Group, citing the company's strong position to capitalize on the shift from over-the-road to intermodal transportation, particularly in the Local East and now in the Local West, due to reliable rail service and cost-effective lanes. The firm notes that while truckload (TL) capacity remains a challenge and competitive bidding in certain lanes persists, lower fuel costs are restraining increases in price per load.
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In other recent news, Hub Group reported its first-quarter 2025 earnings, which showed a slight beat on earnings per share (EPS) but a miss on revenue. The company's EPS came in at $0.44, surpassing the forecast of $0.43, while revenue fell short at $915 million against the expected $973.86 million. Despite the revenue shortfall, Hub Group managed to improve its operating margins, which rose by 40 basis points to 4.1%, partly due to a $40 million cost reduction program. The company has revised its full-year 2025 EPS guidance to a range of $1.75 to $2.25, down from the previous projection of $1.90 to $2.40, anticipating a decline in intermodal volumes. Evercore ISI analysts have also adjusted their EPS estimates for Hub Group, lowering the 2025 forecast to $1.90 from $2.00 and the 2026 estimate to $2.35 from $2.51. Additionally, Evercore ISI has reduced the price target for Hub Group shares to $35 from $38, while maintaining an In Line rating. Hub Group's strategic focus includes maintaining tight cost controls and exploring inorganic growth opportunities to mitigate pressures on its core intermodal business.
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Written By: Investing.com
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