Shares of Forward Air Plummet After Acquisition
Shares of Forward Air tumbled after the company's acquisition of Omni Logistics led to ratings downgrades by analysts. The stock saw a significant drop of 27% to $76.21 in Friday's trading, reaching its lowest price since February 2021 at $75.23. For the year, shares have fallen by 28%.
Forward Air, a provider of less-than-truckload and other distribution services, recently announced its plan to acquire Omni, a reputable logistics and supply-chain management group, in a deal worth $150 million in cash and a combination of Forward common and preferred stock. The transaction is expected to be finalized in the second half of this year.
Following the announcement of the acquisition, several analysts downgraded their ratings on Forward Air. Stifel analysts downgraded the stock to "hold" from "buy." They expressed concerns over the substantial premium paid for the acquisition and highlighted significant execution risks.
In addition, Patrick Tyler Brown and David Hicks, analysts at Raymond James, lowered their rating on the stock to "market perform" from "strong buy." They pointed out that the deal had complicated Forward Air's narrative, introduced considerable leverage to the balance sheet, and would not contribute to earnings in the immediate future. They described the company's situation as a "show-me" story.
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