On Wednesday, Benchmark, a financial analyst firm, increased the stock price target for Schneider National (NYSE:SNDR), a North American transportation and logistics services company, to $34.00 from $32.00. The firm maintained a Buy rating on the stock. This adjustment reflects a moderated outlook for margin recovery and does not account for the pending acquisition of Cowan, as the deal has not been finalized.
The updated price target comes after transport stocks, as tracked by the iShares Transportation Average ETF (IYT), have modestly outperformed the S&P 500 index since the recent election, surpassing it by over 3%.
Benchmark suggests that while there might be some short-term market contraction for these stocks, any pullback should be seen as an opportunity. Schneider National, in particular, is expected to see gradual improvements in its Truckload contract pricing and margins into 2025.
Schneider's Truckload operating margins currently fall short of the company's long-term goals of 12%-16%. However, the company has chosen not to revise these targets, indicating confidence in the potential growth of its Network truckload business. The new price target is based on a price-to-earnings (P/E) ratio of 20 times Benchmark's mid-cycle earnings per share (EPS) estimate of $1.71.
The analyst from Benchmark emphasized that despite slower-than-anticipated margin recovery, Schneider National's Truckload pricing and margins are anticipated to improve. This is expected to have a positive knock-on effect on the company's Intermodal results, although there will be a time lag before these benefits are fully realized.
In summary, Benchmark's revised price target for Schneider National reflects a cautious yet optimistic outlook for the company's financial performance. The firm's analysis suggests that Schneider National's strategic focus on its Truckload and Intermodal businesses will drive earnings growth over the next year, despite current margins not meeting long-term objectives.
In other recent news, Schneider National has made significant strides in its operations. The company's recent acquisition of Cowan Systems, a dedicated contract carrier, for $390 million is expected to bolster its Dedicated segment, adding approximately 1,800 trucks and 7,500 trailers to its fleet. This strategic move was received positively by several analyst firms.
TD Cowen raised its stock price target for Schneider National to $34.00, maintaining a Buy rating, due to the expected financial impact of this acquisition. BofA Securities also raised its stock price targets for the company to $34.00, while Evercore ISI reduced its target from $27.00 to $26.00.
In terms of financial performance, Schneider reported steady revenues of $1.2 billion in its recent third-quarter earnings report. However, the adjusted diluted earnings per share saw a minor dip from $0.20 to $0.18. The company also anticipates a stronger fourth quarter, predicting improved market conditions and seasonal effects. These are some of the recent developments for Schneider National.
InvestingPro Insights
Recent data from InvestingPro adds depth to Benchmark's analysis of Schneider National (NYSE:SNDR). The company's market capitalization stands at $5.83 billion, with a P/E ratio of 52.15, significantly higher than the 20x P/E ratio used in Benchmark's price target calculation. This elevated valuation is reflected in an InvestingPro Tip, which notes that SNDR is "Trading at a high earnings multiple."
Despite the high valuation, Schneider National has shown strong recent performance. The stock has delivered a robust 50.53% total return over the past six months and is currently trading near its 52-week high. These metrics align with the InvestingPro Tips highlighting "Strong return over the last three months" and "Trading near 52-week high."
However, investors should be cautious. An InvestingPro Tip warns that "15 analysts have revised their earnings downwards for the upcoming period," which could impact the company's future performance. Additionally, the stock's RSI suggests it may be in overbought territory, potentially limiting short-term upside.
For a more comprehensive analysis, InvestingPro offers 11 additional tips for Schneider National, providing investors with a broader perspective on the company's financial health and market position.
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