On Tuesday, Wolfe Research adjusted its stance on Forward Air (NASDAQ:FWRD), upgrading the company's stock rating from Underperform to Peer Perform. This shift comes after a significant decline in the company's stock value, which has dropped by 80% since the start of the year, a stark contrast to the S&P 500's 11% gain over the same period.
Forward Air's stock has experienced a nearly 90% decrease since the company announced its Omni acquisition in August 2023. Despite the upgrade, Wolfe Research maintains its previous financial forecasts for Forward Air, projecting an adjusted EBITDA of $170 million in calendar year 2024 and $248 million in calendar year 2025. These estimates are both 21% below the consensus.
The firm also expects Forward Air to report an adjusted EPS loss of $1.30 this year, with a positive turn to $0.50 in calendar year 2025. These projections are notably lower than the consensus, which anticipates a smaller adjusted EPS loss of $0.40 this year and earnings of $1.02 per share in calendar year 2025.
Wolfe Research acknowledges the considerable challenges that lie ahead for Forward Air, including continued EPS losses and high-end balance sheet leverage. However, the firm suggests that the downside risk may be limited if the company can achieve positive free cash flow and sell non-core assets to reduce debt.
In terms of valuation, Forward Air is currently trading at 11.6 times and 8.0 times Wolfe Research's adjusted EBITDA estimates for calendar years 2024 and 2025, respectively. These figures are in line with the company's five-year average of 11.5 times and below the ten-year average of 10.6 times. The upgrade reflects Wolfe Research's view that the risk/reward balance for Forward Air's stock is now more even, given the current depressed levels.
InvestingPro Insights
As Wolfe Research revises its outlook on Forward Air (NASDAQ:FWRD), real-time data from InvestingPro provides additional context to its current financial state. With a market capitalization of $325.99 million, Forward Air is trading at a significantly low Price / Book multiple of 0.35, which may catch the eye of value investors. The company's revenue for the last twelve months as of Q1 2024 stands at $1554.84 million, though it has seen a slight decline of 0.99% in this period. Despite the challenges, Forward Air maintains a substantial dividend yield of 7.79%, potentially offering income to long-term shareholders.
InvestingPro Tips suggest that management's aggressive share buybacks and the anticipation of sales growth in the current year could offer a silver lining. However, analysts have noted concerns, including downward revisions of earnings for the upcoming period and expectations of a drop in net income. Notably, the stock's performance has been underwhelming, with significant price declines over the last year and recent months, reflecting the volatility and bearish sentiment that the article mentions.
For investors considering Forward Air, these insights may provide a deeper understanding of the company's financial health and market position. Subscribers to InvestingPro can access additional tips to further inform their investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and uncover more than 10 additional InvestingPro Tips related to Forward Air's stock and financial prospects.
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