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Baird Raises Forward Air Price Target, Maintains Neutral Rating

Baird analysts increased their price target for Forward Air (NASDAQ:FWRD) to $17 from $14 while maintaining a Neutral rating on the stock.
The analysts noted that Forward Air remains a complex situation as the new management team, led by CEO Shawn Stewart and interim CFO Jamie Pierson, works to define the company’s strategy following the Omni acquisition and de-leverage its balance sheet. Despite ongoing operating losses expected over the next few quarters, the company should benefit from recent improvements in global air and ocean freight rates, which could help reduce cash burn.
Reports indicate Forward Air has recently implemented headcount reductions in sales and technology functions to enhance profitability. While transparency in leverage calculations is expected to improve, it appears the company will remain compliant with covenants following adjustments and a Q1 adjusted EBITDA restatement.
Although the company’s shares have rebounded from lows and new management has stabilized the situation, clarity on long-term earnings potential is expected to take more time. Forward Air is anticipated to provide full-year 2024 guidance alongside Q2 reporting, and Q1 results were impacted by one-time costs, some of which will persist in Q2.
Management’s focus remains on improving profitability and capturing synergies, with cost synergies now expected to total $73.5 million, slightly down from the initial $75 million projection due to less volume-driven leverage and lower technology-related savings, offset by greater savings from facilities consolidation and SG&A. Forward Air recognized approximately $7.5 million of synergies in Q1, and major operational synergies, including linehaul and facility consolidation and PUD insourcing, are either underway or complete. Encouragingly, April performance saw shipments per day increase by about 4% year-over-year, and revenue per shipment ex-fuel rose by 2% year-over-year for the LTL business, with consolidated revenue increasing 6% month-over-month, compared to normal seasonal contraction.

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