On Monday, Stephens has downgraded Schneider National (NYSE: NYSE:SNDR) from Overweight to Equal Weight, maintaining a price target of $28.00. The decision comes as the firm acknowledges a deeper and more prolonged freight recession than initially expected, which has led to disappointment in the resilience and earnings power of the transportation company.
Stephens pointed out that despite Schneider National's diversified operations across Truckload, Intermodal, and Logistics, and its significant presence in the more stable dedicated trucking market, the company's earnings have not been as robust as hoped. The firm estimates that Schneider's trough earnings per share (EPS) on a last twelve months (LTM) basis could see a 41% decline from the previous cycle's trough, underperforming compared to peers like Knight-Swift Transportation Holdings.
The analysis by Stephens suggests that while an earnings recovery for Schneider National is anticipated once market conditions improve, the outlook for 2024 may be overly optimistic. The firm expresses concern over the current balance of potential risks and rewards, leading to the decision to adjust the rating to Equal Weight.
The price target set by Stephens remains at $28, which is based on 14.4 times the firm's 2025 earnings forecast. This target implies a 17% upside from the stock's closing price on Friday. The downgrade reflects a cautious stance on Schneider National's stock in light of the current freight industry downturn and the company's recent performance trends.
InvestingPro Insights
As Schneider National (NYSE: SNDR) faces a downgrade from Stephens, a closer look at the company's financials through InvestingPro provides additional insights into its current position. With a market capitalization of $4.2 billion and a P/E ratio standing at 17.67, Schneider appears to be valued in line with its earnings. The adjusted P/E ratio, reflecting the last twelve months as of Q4 2023, is marginally lower at 17.59. Despite a challenging market, Schneider's revenue remains strong at $5.498 billion, though it has seen a decline of 16.74% over the last twelve months, indicating the pressures of the current freight recession.
From an operational standpoint, Schneider maintains a healthy financial structure. InvestingPro Tips suggest the company's cash flows can sufficiently cover interest payments and its liquid assets exceed short-term obligations, which could provide some resilience in the face of economic headwinds. Additionally, the company operates with a moderate level of debt, which may offer some flexibility during downturns.
Looking ahead, analysts predict Schneider will be profitable this year, which aligns with the company's profitability over the last twelve months. This is a critical factor for investors considering the stock's potential for recovery once the market conditions improve. With a special New Year sale, an InvestingPro subscription now offers up to a 50% discount. To further enhance the value, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription. With 7 analysts revising their earnings downwards for the upcoming period, accessing the 5 additional tips listed in InvestingPro could provide a more comprehensive understanding of Schneider's prospects.
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