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Bull of the Day: Echo Global Logistics (ECHO)

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·3 min read
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Echo Global Logistics (ECHO) is a Zacks Rank #1 (Strong Buy) that is a leading logistics provider, offering transportation and supply chain management solutions. The company utilizes a proprietary technology platform to compile and analyze data from its multi-modal network of transportation providers for transportation and logistics needs.

About the Company

Echo employs over 2,600 and is headquartered in Chicago, IL. The company was founded in 2005 and has since served manufacturing, construction, food and beverage, consumer products and retail industries.

ECHO is valued at $875 million and has a Forward PE of 17. The company holds a Zacks Style Score of “B” in Growth, but “C” in Value.

Q3 Earnings

In late April, the company reported strong earnings, seeing beats on both the top and bottom lines. Q1 came on at $0.61 v the $0.47 expected, a 30% beat above Zacks estimates. Revenues came in at $800.8M v the $702M expected.

Additionally, Echo guided Q2 revenues higher and raised FY21 revenues. Echo now sees the Q2 number in a range of $830-870M v the $729M expected. For FY21, the company now sees a range of $3.15-3.35B v the $2.85B expected.

Estimates and upgrades

The guidance forced analysts to hike their estimates, which over the last month, are headed higher across all time-frames. For the current quarter, estimates have gone from $0.45 to $0.52, or 15.5%. For the current year, estimates have ticked 7% higher, from $1.82 to $1.95.

After earnings, the company saw a handful of analysts reiterating their bullish stance. Truist was out with positive commentary, saying the results were “Miles Ahead” and lifted its target to $37 from $35. Barrington Research is also bullish, giving the stock an Outperform rating and a $43 target. While Susquehanna reiterated its Neutral stance, the firm took its targets for ECHO to $36 from $31.

Strong Momentum

The dynamic of strong freight demand and tight capacity are providing ECHO with a positive market. Analysts see a combination of favorable market conditions and strong execution as factors for robust revenue growth.

Additionally, market share gains are helping the company’s strong performance. As evidence for this, analysts point to truckload shipments for Echo gaining 13% y/y vs C.H Robinson’s 6.5% decline.

The Technical Take

The stock shot higher after earnings, moving from the $31 level to $37, a gain of over 20%. The $37.65 print was the all-time highs, which have not come into play since late 2018. The stock has been volatile since EPS and has since pulled back to the 50-day MA at $33. This area is also the 61.8% retracement from the earnings move. If this spot holds, new highs will likely be tested in time.

Investors that want to be more patient can eye the 200-day MA, which is just above the $29 level.

In Summary

Earnings momentum has finally turned very positive for ECHO. The stock has pulled back to technical levels that make it attractive. If market conditions remain and management executes as they have, investors will be rewarded.

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