Freight transportation company XPO Logistics, Inc. (NYSE: XPO) recently revealed the sale of its North American intermodal business to STG Logistics for an all-cash deal of $710 million. The deal is expected to close in the fourth quarter of 2022.
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Following the news, shares of the company rose 1.1% on Friday. The stock, however, pared its gains slightly to close at $76.97 in the extended trading session.
Details of the Deal
XPO Logistics’s intermodal unit is a part of the company’s Brokerage and Other Services segment. Notably, the unit generated revenues of about $1.2 billion in 2021.
The divested unit provides rail brokerage and drayage services spanning across 48 locations and has about 700 employees on its payroll.
Management Commentary
The CEO of XPO Logistics, Brad Jacobs, said, “This divestiture simplifies our business model and moves our capital structure closer to investment-grade — two priorities in our strategic plan to unlock significantly more value for our stakeholders. We’ve completed a key step in preparing for our planned spin-off, when we’ll separate XPO into two publicly traded leaders in less-than-truckload transportation and tech-enabled brokered transportation services.”
Stock Rating
Recently, Bank of America Securities analyst Ken Hoexter upgraded the stock to a Buy from Hold with a price target of $96, which implies upside potential of 24.7% from current levels.
According to the analyst, the impending spin-off of its truck brokerage services “will be one of the most exciting pure plays in the sector.”
Consensus among analysts is a Strong Buy based on 13 unanimous Buys. The XPO average price target of $99.27 implies upside potential of 28.9% from current levels. Shares have gained 9% over the past year.
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