Morgan Stanley’s decision Tuesday to boost its price target on XPO Logistics (XPO) to $65 a share, from $45, could signal a “new king” in the trucking-and-logistics industry, CNBC’s Jim Cramer said — even though he’s long been partial to Old Dominion (ODFL). Shares of XPO were trading down around 1% Tuesday morning, at roughly $72.80 a share. Meanwhile, Cramer also said Tuesday that we could be in a “golden age of natural gas,” on the heels of the Investing Club’s move last week to add to its position in oil-and-gas producer Coterra Energy (CTRA). (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Morgan Stanley’s decision Tuesday to boost its price target on XPO Logistics (XPO) to $65 a share, from $45, could signal a “new king” in the trucking-and-logistics industry, CNBC’s Jim Cramer said — even though he’s long been partial to Old Dominion (ODFL).
Shares of XPO were trading down around 1% Tuesday morning, at roughly $72.80 a share.
Meanwhile, Cramer also said Tuesday that we could be in a “golden age of natural gas,” on the heels of the Investing Club’s move last week to add to its position in oil-and-gas producer Coterra Energy (CTRA).
(See here for a full list of the stocks in Jim Cramer’s Charitable Trust.)
As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.
THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Here are the biggest calls on Wall Street on Friday: Barclays names Dick’s a top pick Barclays named the sporting goods store a top pick and says it sees accelerating growth. “We view 2022 as the new solid foundation from which DKS can now reaccelerate • its growth algorithm through: 1) sustainable positive comp growth driving market share gains, 2) gross and operating margin expansion as it exits a period of supply chain disruption.” HBSC upgrades AT & T to buy from hold HSBC said in its upgrade of the stock after its earnings report that investors should buy the dip. “But a slowdown in market momentum has been widely flagged (by all operators) for months, and AT & T’ s absolute growth in mobile subs remained solid.” Read more about this call here . Bank of America reiterates Alphabet as buy Bank of America says it’s bullish heading into Alphabet earnings next week. “We think 1Q could show cost improvement upside, while in-line search results could be a modest positive for market share concerns (we think street will see better evidence of cost cutting and margin improvement by 2Q).” JPMorgan reiterates Amazon as a best idea JPMorgan says it’s bullish heading into the e-commerce giant’s earnings report next week. “We’re modeling continued e-comm share gains in 2023 as AMZN & other retailers gain share in key under-penetrated categories such as grocery, CPG, apparel & accessories, & furniture/appliances/equipment.” Morgan Stanley reiterates Blackstone as overweight Morgan Stanley says the alternative investment management company is “resilient.” “We believe BX is best positioned to navigate the backdrop, capitalize on dislocation with $190b dry powder & propel earnings power.” Argus upgrades Dollar General to buy from hold Argus said in its upgrade of the dollar store company that it’s “rare retailer.” “We are raising our rating on Dollar General Corp . to BUY from HOLD and setting a one-year price target of $250. DG is a rare retailer that is growing square footage and posting positive comparable sales. Our five-year growth rate is 11%.” UBS initiates Bill.com as buy UBS said in its initiation of the software billing company that shares are attractive at current levels. “Since we’re a bit more constructive than the Street and negativity already seems embedded in BILL shares (amongst worst performing software stocks YTD), we view risk/reward as biased upward at these levels.” Piper Sandler downgrades Big Lots to underweight from neutral Piper said in its downgrade of Big Lots that it sees demand slowing. “Big ticket discretionary demand appears to be deteriorating (despite easier y/y compares), and we are worried about companies with break-even EBITDA (or worse).” Morgan Stanley downgrades Seagate to equal weight from overweight Morgan Stanley said in its downgrade of Seagate that it sees a recovery pushout for the hard disc data drive company. “As a result, we believe path to outperformance has also been pushed out, with risk more elevated near term.” Wells Fargo names Starbucks a top pick into earnings Wells says Starbucks is a “best idea” heading into earnings on May 2 and the “China inflection adds upside.” “Shares are -2% post-Q1 & we see improving Q2 risk/reward behind ongoing domestic strength (positive Q2 traffic; Ex 29), a likely China inflection (vs. a very low Q2 bar) & anticipated upside to the FY23 outlook.” Cantor Fitzgerald initiates CVS as buy Cantor said in its initiation of the stock that it’s underappreciated. “We are initiating coverage of CVS Health with an Overweight rating and 12-month price target of $87; Investors are underestimating the power of the flywheel CVS is piecing together, in our opinion.” Cantor Fitzgerald initiates UnitedHealth as buy Cantor said in its initiation of the healthcare company that it sees near-term earnings upside. ” United is ahead of the market in using commercial product innovation to solve for the problem of employers wanting to hold price trends, while providers are looking for a three-year step-up from historical averages.” Benchmark initiates Sea Limited as buy Benchmark initiated the Singapore-based internet tech company with a buy and says it sees rapid growth ahead. “We believe that SE should remain a key beneficiary of Southeast Asia’s fast growing digital economy in years to come.” Benchmark initiates Grab Holdings as buy Benchmark said in its initiation of the Asian internet company that it’s a “significant market consolidator” “As part of our industry launch of Southeast Asia Ecommerce, we are initiating coverage of GRAB, a leading platform player offering mobility, delivery, fintech and enterprise services in SEA (Southeast Asia Ecommerce).” JPMorgan upgrades XPO to overweight from neutral JPMorgan said in its upgrade of the logistics company that it likes the company’s recent management changes. “Our estimates remain unchanged but we are upgrading to Overweight with a higher, yet still discounted, multiple compared to peers as we believe this strategic hire should help unlock the potential at XPO which is still not completely reflected in the stock.” Read more about this call here. Goldman Sachs reiterates Philip Morris as buy Goldman says the tobacco company is an “earnings compounder with attractive valuation.” “Ultimately, we believe mgmt’s Q2 guide is conservative and therefore we see a nice set up for a potential beat and raise quarter. This, in addition to PM’s Investor Day in September, should be positive catalysts for the stock.” Read more about this call here. Morgan Stanley reiterates Spotify as overweight Morgan Stanley raised its price target on the stock to $160 per share from $130 and says “price increases, margin expansion, and market share” will drive the stock. “We continue to see streaming music & audio as an attractive growth market and remain OW WMG and SPOT.” Wells Fargo reiterates Microsoft as overweight Wells says expectations are “mixed” heading into earnings next week, but that the firm is standing by the stock. “While optimizations and macro are likely to impact FQ3 results, we see favorable offsets forming beyond, inc. MSFT’s ability to both consolidate spend from incumbent categories (productivity, biz apps, security) & gain share in newer ones.” Truist downgrades Tesla to hold from buy Truist said in its downgrade of the stock that it was surprised by the company’s “willingness to accept lower margins.” “What surprised us is TSLA’s stated willingness to reduce price further, accepting still lower automotive margins, to broaden & deepen its ability to generate revenue from AI projects, most notably FSD.” Goldman Sachs reiterates ServiceNow as buy Goldman says it’s bullish heading into the work flow solutions company’s earnings report next week. “We expect investors to put more weight on NOW’ s 1Q results, despite it being a seasonally weak quarter, as they look for signs of continued durability.” Truist initiates CyberArk as buy Truist initiated the cyber security company with a buy and says it has a first mover advantage. ” CYBR is a leader in Privilege Access Management, which is becoming a critical layer of cybersecurity and center of identity security. The company’s transition to a subscription-based model has resulted in strong visibility and durability of its business as well as higher customer lifetime value.” Baird reiterates McDonald’s as outperform Baird says it’s bullish heading into earnings next week. “We see potential for Q1 comps/EPS to exceed estimates (perhaps already priced in?), and we continue to believe MCD can fuel solid operating momentum in the balance of 2023 despite possible economic headwinds.” Stephens upgrades Pool Corp. to overweight from equal weight Stephens said in its upgrade of Pool that it sees an “attractive entry point” for the pool company. “The stock could tread water in the ultra-near-term as seasonally it is still too early to fully gauge activity levels, which could keep investors waiting. However, we think 20x next year’s earnings for a best-in-class, high quality compounder that consistently puts up 25%-30% ROIC, consistent market out-performance and strong FCF is an attractive entry point.” Stephens initiates SentinelOne as overweight Stephens initiated the cyber security company with an overweight and says it has “best-in-class growth.” ” SentinelOne’s platform addresses many of the highest priority areas of security spending.” JPMorgan reiterates Charles Schwab as overweight JPMorgan says Charles Schwab could be worth more if it were to “de-bank.” “While earnings would fall materially were Schwab to de-bank, we believe Schwab would trade at a higher (possibly meaningfully higher) multiple, which would/ could justify a higher value than the stock is trading at today. … .Schwab could feasibly de-bank. Schwab is not a bank, but rather is a broker that operates a bank, and as such we see it feasible that Schwab could operate without a bank.”
An Optoro warehouse in Tennessee that handles returns for retailers.
Source: Matt Adams | Optoro
As the markets prepare for the latest consumer price index data to be released on Tuesday, logistics managers are warning of a persistent source of inflation in the supply chain and saying consumers should be ready for the effect it will have on their wallets.
While many sources of supply chain inflation that stoked higher goods prices have come down sharply — including ocean freight rates and transportation fuels — bloated inventories due to a lack of consumer demand are sustaining upward pressure on warehouse rates.
“In 2022, we saw rate levels for international air and ocean and domestic trucking fall back down to earth,” said Brian Bourke, global chief commercial officer at SEKO Logistics. “But inflationary pressures remain where demand outpaces supply in 2023, including in warehousing through most of the United States, domestic parcel and labor.”
One reason for the imbalance between warehouse supply and demand is the lack of new facilities coming into the market.
“National warehousing capacity remains low and will remain tight for the foreseeable future as U.S. industrial construction starts have fallen considerably year-over-year due to rising interest rates,” said Chris Huwaldt, vice president of solutions at WarehouseQuote.
Consumer prices have come down sharply as goods inflation that surged during the pandemic has cooled. And Federal Reserve Chairman Jerome Powell expressed confidence after the most recent Fed meeting that disinflation “has begun.” December’s CPI was the smallest year-over-year increase since October 2021, at6.5% on an annual basis, down from a 9.1% peak in June 2022.
The Fed is now more focused on services inflation, in particular labor prices, as it expects the pressure in goods inflation to continue a downward trend. But the logistics issues suggest there will be some elements of sticky inflation on the goods side of the equation.
“The market is starting to sense that the very comforting disinflation story is more complex than we would like it to be,” Mohamed El-Erian, Allianz chief economic advisor, told CNBC’s “Squawk Box” on Monday morning. “The comforting story was simple: Goods disinflation continues and service inflation comes down, that wonderful concept that Chair Powell calls core services, ex-housing, comes down and, lo and behold, we don’t have an inflation problem. Now we’re starting to see certain goods reverse this inflationary process so there’s more uncertainty about inflation.”
Some shippers are holding their products in containers on chassis because of full warehouses and distribution centers, but this means they’re incurring charges which are passed on to the consumer. Shippers are given an allotted amount of free time during which they are not charged for holding a container, but once those days expire, they start to be charged per diem charges (i.e., late container charges that are charged for containers out of port).
Containers left on chassis create two costly problems, said Paul Brashier, vice president of drayage and intermodal for ITS Logistics. It prevents those chassis from being used to move newly arriving containers, putting additional stress on chassis pools throughout the U.S., especially inland rail ramp pools. Shippers will also be charged fees for the dwelling chassis — separate from the per diem charge shippers pay per day once the container is out of use beyond its free time. “This can lead to tens of millions of dollars in penalties,” Brashier said.
He predicts that per diem charges are going to surge in the second and third quarters of this year.
“These are on top of charges for warehousing, which are still at historic highs,” Brashier said. “Late fees and warehouse fees are passed onto the consumer, which is why we are not seeing products fall as much as they should.”
Shipping containers at a container terminal at the Port of Long Beach-Port of Los Angeles complex, in Los Angeles, California, April 7, 2021.
Lucy Nicholson | Reuters
National storage pricing is up 1.4% month-over-month and 10.6% year-over-year, according to WarehouseQuote.
Many small businesses, which represent the largest share of the U.S. economy in number but are often the last to benefit from a decline in supply chain pricing, tell CNBC they do not believe inflation has peaked.
For shippers with inventory imbalances, Brashier says these charges could cost tens of millions of dollars per quarter. Brashier warns these charges, on top of weaker consumer demand, will ripple through earnings.
ITS Logistics is advising clients to avoid a hit to their bottom line by considering short-term, pop-up storage offered by third-party logistics providers, or 3PL, and grounding operations. “This will reduce reliance on storing freight in ocean containers,” Brashier said.
Mark Baxa, president and CEO of the Council of Supply Chain Management Professionals, tells CNBC that inflation and higher interest rates are driving supply chain leaders to critically examine working capital investments in inventory and operations in relation to consumer demand forecasts.
“In the short run, supply chains have moved closer to finance teams to manage cash flow, coupled with greater efforts to manage costs across operations. Considerations have moved to close-in review and total cost management across the business, including people, technology, warehousing and transportation investments,” Baxa said.
One industry facing supply chain inflationary headwinds is construction.
Phillip Ross, accounting and audit practice leader of Anchin’s architecture and engineering group, said supply chain inflation has made it more difficult for companies to manage completion times for projects.
“In some cases, we are looking at six to eight months before materials will be available,” Ross said. “Construction, as one of the largest industries in the U.S., is uniquely impacted by the supply chain, which led to construction companies experiencing not only delays in their work but also increased prices for materials.”
Some inflationary elements stemming from Covid-related supply chain disruptions remain, according to Jim Monkmeyer, president of transportation at DHL Supply Chain. These include higher costs related to diversion of containers to East Coast ports, production disruptions and shortages in China and elsewhere, and intermodal constraints forcing higher cost alternatives, such as air freight and expedited truck.
Even with the rate of inflation slowing, higher consumer prices are expected to remain for a variety of other reasons, from contract terms set with suppliers before recent disinflation and company desire to maintain profit margins.
Steve Lamar, CEO of the American Apparel and Footwear Association, tells CNBC that shippers are also finding it harder to absorb extra costs as a result of the Trump-Biden tariffs on China. “These tariffs are now hitting $170 billion and are baked into the cost of goods and, hence, higher prices at the register,” Lamar said. “The tariffs make it harder for companies to absorb other inflationary costs.”
