Wolfe Research analysts raised the firm's price target for XPO Inc (NYSE:XPO) to $105 from $87 per share in a note on Wednesday, maintaining an Outperform rating on the stock.
They told investors in the note assessing transport stocks in the third quarter that the risk/reward is improving for transport stocks again.
"We're seeing early signs of freight demand bottoming with recent improvement in West Coast import volumes and rail intermodal & carload volumes," wrote the analysts.
However, they noted that TL spot rates remain near historical lows, and the firm expects continued pressure on contractual pricing and overall yield growth. As a result, Wolfe Research sees continued EPS risk across the group in 3Q "with even greater risk to Street 4Q estimate."
Even so, XPO, alongside FedEx (NYSE:FDX) and TFI International Inc. (NYSE:TFII), remains the firm's favorite stock in the sector. The firm also raised the FDX price target to $370 from $303, while TFII's price target was lifted to $175 from $162. Both were maintained at Outperform.
Wolfe Research analysts commented that XPO has "huge turnaround potential," and they see "significant potential margin and stock upside from current levels."