Last Update 26 Dec 25

Fair value Increased 0.38%

RXO: AI Execution Will Drive EPS Recovery Despite Short Seller Pressure

Analysts have nudged their average price target on RXO slightly higher to approximately $15.65 from about $15.59, citing expectations that the company can leverage its emerging AI capabilities and cost discipline to support at least $1 of normalized EPS over time, despite near term margin pressure and reduced earnings forecasts.

Analyst Commentary

Street research on RXO reflects a wide range of views, with bullish analysts emphasizing the company’s AI roadmap and earnings power over the cycle, while bearish analysts focus on weaker recent results and compressed profitability in the current freight backdrop.

Bullish Takeaways

Bullish analysts argue that RXO can emerge as a leading adopter of AI in the brokerage space, supporting superior productivity, pricing efficiency, and ultimately higher through-cycle margins.
Some see the recent share price pullback as overdone relative to RXO’s long term earnings potential, especially given the view that normalized EPS of at least $1 remains achievable once the freight cycle improves.
Upward price target revisions in recent months have been tied to expectations that cost discipline, network optimization, and tech investments can drive attractive operating leverage when demand normalizes.
Supportive voices highlight that a stabilizing freight market, combined with carrier exits and regulatory tightening, could improve pricing power over time, enhancing RXO’s growth and valuation multiples.

Bearish Takeaways

Bearish analysts point to disappointing Q3 performance, noting misses across key financial metrics that raise execution questions and justify lower near term earnings forecasts.
Several have cut price targets as guidance for Q4 EBITDA came in well below prior expectations, triggering sizable reductions to outer year EPS estimates and compressing perceived fair value.
Concerns center on anticipated gross margin pressure in a tightening spot rate environment, which could delay operating margin recovery and weigh on the company’s ability to reach its longer term EPS targets.
More cautious views maintain Negative or Neutral stances, arguing that until visibility improves on demand, pricing, and earnings power, RXO’s valuation should remain constrained relative to more diversified peers.

What's in the News

Short-seller DF Research published a report labeling RXO "a fundamentally flawed business" and alleging the company has relied on "misleading maneuvers" to support its valuation (DF Research short report).
RXO reported that between July 1, 2025 and September 30, 2025, it repurchased zero shares under its ongoing buyback program, and confirmed it has cumulatively repurchased 100,000 shares, or about 0.09%, for $2.05 million under the authorization announced May 3, 2023 (company buyback update).

Valuation Changes

Fair Value increased from approximately $15.59 to about $15.65 per share, reflecting a modestly more constructive long term outlook.
Discount Rate rose slightly from roughly 8.55% to about 8.63%, implying a marginally higher required return and risk assumption.
Revenue Growth declined from around 2.88% to roughly 2.66% annually, indicating slightly more conservative top line expectations.
Net Profit Margin decreased from about 1.49% to roughly 1.31%, signaling tempered assumptions for long run profitability.
Future P/E moved higher from approximately 34.4x to about 39.5x, suggesting a richer valuation multiple on projected earnings despite softer growth and margin inputs.

Proprietary digital technology, unified platforms, and asset-light operations are driving sustainable margin expansion and differentiating RXO as a logistics industry leader.
Diversification and growth in LTL brokerage and e-commerce shield RXO from cyclical downturns, supporting stable free cash flow and consistent earnings strength.
Heavy reliance on the automotive sector and exposure to freight market softness, integration risks, and cost pressures could threaten RXO's revenue growth, margins, and long-term earnings.

Catalysts

About RXO

Engages in truck brokerage business in the United States, Canada, Mexico, Asia, and Europe.What are the underlying business or industry changes driving this perspective?

RXO's relentless investment in AI-powered, proprietary digital freight-matching technology is rapidly boosting employee productivity (up 45% in two years) and driving operating leverage; as digital adoption accelerates in logistics, this sets up sustainable margin and EBITDA growth, making current valuation disconnect notable.
Surging LTL brokerage volume (up 45% YoY) and its increasing share of total load mix (now 32%, up from 10% at spin) provide stability and higher-margin revenue streams; LTL brokerage is less cyclical than truckload, supporting consistently stronger earnings through future cycles.
Completion of Coyote integration and unified tech platform enable RXO to leverage greater network density and procure transportation more efficiently, as seen in 30–50 bp improvements in buy rates and material cost avoidance, directly lifting gross margin and future cash flows.
Secular growth in e-commerce and on-demand, tech-enabled supply chain solutions is expanding RXO's total addressable market, and its asset-light, tech-focused model positions the company to outpace peers in capturing new, higher-margin business, positively impacting topline growth and long-term earnings.
Diversification across multiple industry end-markets (e.g., e-commerce, retail, industrials, big & bulky final mile) reduces cyclicality risk and underpins the company's ability to deliver stable or growing free cash flow and net margins despite current macro softness.

RXO Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming RXO's revenue will grow by 7.3% annually over the next 3 years.
Analysts assume that profit margins will increase from -5.5% today to 1.9% in 3 years time.
Analysts expect earnings to reach $132.5 million (and earnings per share of $0.54) by about September 2028, up from $-308.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $50.4 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.1x on those 2028 earnings, up from -8.5x today. This future PE is greater than the current PE for the US Transportation industry at 25.4x.
Analysts expect the number of shares outstanding to grow by 1.99% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.51%, as per the Simply Wall St company report.

RXO Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

RXO remains heavily exposed to ongoing and potentially prolonged weakness in the automotive sector, a high-margin vertical for the company that has caused significant year-over-year gross profit and truckload volume declines; persistent headwinds here threaten revenue stability and earnings resilience if auto softness endures or deepens.
The company continues to operate within a soft freight environment characterized by limited spot market opportunities and tepid overall freight demand, highlighting RXO's vulnerability to macroeconomic cycles and exposing future revenue and net margin growth to the pace of broader economic and freight demand recovery.
While RXO is reporting robust growth in less-than-truckload (LTL) brokerage, the broader LTL market is not immune to future competitive pressures or diminishing returns as volume mix shifts, potentially translating to lower gross profit per load and less contribution to overall EBITDA growth if margin stability erodes.
Ongoing large-scale integration of Coyote and tech platforms presents notable execution and technology risk; any slippage in realizing expected cost synergies or underperformance in digital platform investments compared to digital-native or larger competitors could impact future operating leverage, margin expansion, and earnings projections.
RXO's asset-light business model, despite recent efficiency gains, remains exposed to rising industry-wide labor costs, insurance and litigation expenses, and intensifying competition from both traditional and digital brokerage platforms-factors that could compress net margins, threaten market share, and dampen long-term earnings power.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $16.235 for RXO based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $10.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.9 billion, earnings will come to $132.5 million, and it would be trading on a PE ratio of 27.1x, assuming you use a discount rate of 8.5%.
Given the current share price of $16.0, the analyst price target of $16.24 is 1.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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