FedEx’s Plan To Spin Off Freight Division Draws Slew Of Analyst Price Target Hikes: Retail Chatter Hits 1-Year High

Shares of FedEx Corp. (FDX) surged over 9% in Friday’s pre-market trading, eyeing highs from over three weeks ago, after the logistics giant said it intended to separate its FedEx Freight business fully and reported its second-quarter earnings.

FedEx said the complete separation of FedEx Freight is expected to be achieved in a tax-efficient manner for shareholders and executed within the next 18 months.

According to analysts, the Freight division is worth approximately $33 billion, as per a Financial Times report. The division reported revenues of $9.4 billion in 2024 and is the largest less-than-truckload (LTL) carrier and has delivered operating profit by nearly 25% on average per year over the last five years.

FedEx CEO Raj Subramaniam called it the right time to pursue a separation. “Through this process, we will unlock value for our Freight business and position FedEx to create even greater value for stockholders,” he said in prepared remarks.

FedEx believes the separation of the Freight unit will lead to enhanced operational focus and strategic execution and separate public stock listings will enhance the value proposition for each company.

Meanwhile, the firm also reported its second-quarter (Q2) earnings with a revenue of $22 billion compared to $22.2 billion in the same quarter a year ago and a Wall Street estimate of $22.09 billion.

Earnings per share (EPS) came in at $4.05 compared to an analyst estimate of  $3.93, according to FinChat.

Adjusted net income stood at $0.99 billion compared to $1.01 billion in the second quarter last year.

FedEx said that consolidated operating results were negatively impacted by lower-than-expected FedEx Freight revenue and profit.

A sustained weakness in the U.S. industrial production continued to weigh on the LTL industry demand, the firm said.

For fiscal 2025, FedEx projected approximately flat revenue year-over-year, compared to the prior forecast of a low single-digit percentage increase. Diluted EPS is expected at $16.45 to $17.45 before the MTM retirement plans accounting adjustments compared to the prior forecast of $17.90 to $18.90 per share.

The company expects to repurchase an additional $500 million of common stock during fiscal 2025, for a buyback total of $2.5 billion.

Following the developments, retail sentiment on Stocktwits jumped into the ‘extremely bullish’ territory (76/100) from ‘bullish’ a day ago. The move was accompanied by extremely high message volumes (96/100) that hit a one-year high.

FDX’s Sentiment Meter and Message Volume as of 7:21 a.m. ET on Dec. 20, 2024 | Source: Stocktwits

Retail chatter on Stocktwits indicated optimism about the stock’s near-term potential.

Following the official announcement of the freight division spin-off, the stock received a slew of price target hikes by analysts.

JPMorgan raised its price target on FedEx to $370 from $366, while keeping an ‘Overweight’ rating on the shares, according to The Fly. UBS raised its price target to $350 from $311, while keeping a ‘Buy’ rating on the shares.

Bank of America, too, increased its price target to $348 from $325, while keeping a ‘Buy’ rating on the shares.

Notably, shares of FedEx have gained over 9% since the beginning of the year.

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