RXO (NYSE:RXO) stock gained about 14% in Monday’s pre-market trading session. The upside came after the company agreed to acquire the freight-brokerage arm, Coyote Logistics, of United Parcel Service (NYSE:UPS) for $1.025 billion. The news had no material impact on UPS’s stock price.
The deal is expected to close by the end of 2024, subject to regulatory approvals.
Coyote Logistics connects shippers with freight carriers. It is currently managing a network of 100,000 carriers and handling 10,000 daily loads. In 2023, the company generated $3.2 billion in revenue and about $86 million in adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).
Deal Benefits
The Coyote Logistics deal is expected to be beneficial for both RXO and UPS. For RXO, the deal is expected to enhance its market position, making it the third-largest broker in the U.S. Additionally, RXO anticipates an 80% increase in customers, generating over $1 million in annual business, thereby boosting its revenue potential. Additionally, the deal is expected to create annual cost synergies exceeding $25 million for RXO.
Meanwhile, for UPS, the sale is expected to streamline the company’s operations by offloading a less profitable business unit. Also, the move will allow UPS to focus on its core business, i.e., package delivery.
Now, let’s take a look at what the Wall Street analysts think about UPS and RXO stocks’ future potential.
Is UPS a Good Stock to Buy Now?
Wall Street is cautiously optimistic about United Parcel stock. It has 11 Buy, eight Hold, and one Sell recommendations for a Moderate Buy consensus rating. The analysts’ average price target on UPS stock is $162.05, implying 18.63% upside potential from current levels. Shares of the company are down 12% over the past six months.
Is RXO Stock a Good Buy?
Currently, analysts are sidelined on RXO stock. Based on three Buy, six Hold, and two Sell recommendations for a Hold consensus rating. Analysts’ average price target on RXO stock of $20.13 implies 0.4% downside potential from current levels. RXO has declined 16.3% over the past six months.
