Stifel has lowered its recommendation on Hub Group (NASDAQ: HUBG) from Buy to Sell and cut its price target to $27 from $52 after the transportation management firm revealed a material accounting misstatement in its historical results.
The research note follows Hub Group's partial fourth-quarter 2025 release and a disclosure that purchased transportation costs and accounts payable were understated by $77 million for the first nine months of 2025. Management has delayed filing fully audited earnings while it addresses the error and has not provided a timeline for completion of those audited results.
At the time of the revision, the stock was trading at $51.33 and appears overvalued on InvestingPro Fair Value metrics, with a price-to-earnings ratio of 29.92. Stifel's downgrade reflects the firm's assessment that the accounting issue likely extends into the fourth quarter of 2025, producing a materially lower margin starting point for future earnings.
Stifel now models a conservative 2027 earnings-per-share level of $1.75. According to the firm's calculations, that EPS benchmark implies roughly 47% downside from current valuation levels. While Stifel notes that market tailwinds and an aggressive cost-rationalization program could yield a faster recovery than their updated model assumes, the firm has adopted a more cautious outlook on Hub Group's near-term prospects.
Hub Group's partial fourth-quarter 2025 results also showed a 7% year-over-year decline in consolidated operating revenue, which totaled $3.7 billion. During the accompanying earnings call, the company emphasized a strategic focus on technology investments and efforts to improve operational efficiency as part of its plan to navigate current conditions.
Despite those efforts, the company is operating with weak gross profit margins of 11.38%. The share price reacted to the disclosure and earnings release, trading down by 1.09% in aftermarket trading following the announcement.
Key facts in this developing situation include the magnitude of the misstatement - $77 million - and the absence of a timetable for audited results. Stifel's updated forecast and price target are based on the assumption that the misstatement will affect reported margins into the fourth quarter of 2025, materially altering the baseline for future earnings expectations.
Investors and market participants will be watching for completion of the audit, any further adjustments to historical financials, and management's execution on cost and operational initiatives outlined on the earnings call. Until audited results are available, uncertainty about the extent and duration of the accounting issue will continue to weigh on the company's financial outlook.