Earnings Preview: Max Fuel Benefit In 2Q, But Stronger Yields Provide Upside For 2027 EPS

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Earnings Preview: Max Fuel Benefit In 2Q, But Stronger Yields Provide Upside For 2027 EPS

U.S. LTL UBS Research

Raising EPS and Price Targets For The LTLs: Truing Up Fuel Price,

Volume, and Yield Assumptions

As summarized in Figure 1, below, we are raising EPS estimates for all the less-than-

truckload (LTL) names to reflect the impact of higher fuel prices and yields vs. our prior

models. Our retail fuel price assumptions for 2H26 and 2027 increase by ~low teens and

this contributes to all-in yields that are ~4 pp higher in 2027 vs. our prior estimates. We

estimate LTL margins on fuel surcharge revenue range from 40%-60%, so higher fuel

price assumptions broadly result in better estimated 2027 operating ratios (see Fig 5).

Our tonnage assumptions for 2027 are largely unchanged, with some growth pulled

forward to 2026 due to higher weight per shipment. Our 2027 EPS estimate increases

range from ~20% for ARCB and TFII to 4%-9% for ODFL, SAIA, and XPO. We note that

TFII has a large specialized truckload business, which is experiencing strong rate

increases, in addition to its LTL business.

Higher earnings estimates drive an increase in our price targets for ODFL ($216 to $224),

SAIA ($493 to $527), XPO ($236 to $257), and ARCB ($122 to $145). For TFII, the

combination of higher 2027E EPS and a higher target P/E results in a revised price target

of $154 (prior $110). Our target P/E for TFII increases from 17x to 20x, which is one

standard deviation above the 5-year average (17x). This adjustment results in more

consistent valuation for TFII vs. the rest of the LTL names, where we already use target

P/Es that are ~1.0 to 1.5 standard deviations above average. The strong valuations

across the LTL group reflect investor optimism about a cycle upturn in both price and

volume.