XPO (XPO) is well-positioned to continue expanding its less-than-truckload operating ratio, as many of its initiatives are still in the early stages, Oppenheimer said in a note Thursday.

Oppenheimer analysts, including Scott Schneeberger, said that given the company's better service, strong growth, capacity investments, and effective efficiency initiatives, it is on track to improve its 2024 less-than-truckload operating ratio by about 250 basis points year-over-year, outperforming its publicly-traded peers.

XPO's strategic shift from three years ago is continuing to "bear fruit," the note said. By early 2025, the opening of 28 acquired Yellow Corp. service centers will give XPO around 30% extra capacity, positioning the company well for growth "upon anticipated cyclical improvement," the analysts said, adding that they are keeping their adjusted earnings before interest, taxes, depreciation, and amortization estimates for 2024, 2025, and 2026 at $1.24 billion, $1.41 billion, and $1.55 billion, respectively.

"We anticipate XPO's valuation builds as it ultimately divests its European Transportation business, and more importantly, evolves its customer service-focused strategy, capacity, and the efficiency of its North American LTL business," the analysts said.

Oppenheimer raised its price target on XPO to $176 from $148 while maintaining an outperform rating on the stock.

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