FedEx shares jump after parcel giant says it will spin off freight division

Baystreet
2024.12.20 12:00
portai
I'm PortAI, I can summarize articles.

FedEx shares rose over 7% in premarket trading after the company announced plans to spin off its freight division, creating two independent public companies. CEO Raj Subramaniam stated the separation is timely due to LTL market dynamics and aims to be tax-efficient for shareholders, expected within 18 months. Analysts from Raymond James and Loop Capital upgraded FedEx's stock ratings and price targets, viewing the spin-off as a value-unlocking event. FedEx reported Q2 earnings matching estimates but missed revenue expectations, while ongoing restructuring efforts continue.

Investing.com -- FedEx Corporation (NYSE:FDX) saw its shares jump more than 7% in premarket trading Friday after the company announced plans to spin off its less-than-truckload freight division.

FedEx intends to carry out the spinoff through a capital markets transaction, creating two independent, industry-leading public companies.

As two industry-leading public companies, FedEx and FedEx Freight will continue to pursue their growth strategies, the company added.

“This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market,” said CEO Raj Subramaniam.

The company stated the separation is expected to be executed in a tax-efficient manner for FedEx stockholders and completed within the next 18 months.

Raymond (NS:RYMD) James analysts believe the spin-off "should serve as a value-unlocking event and will put more scrutiny on the operations of the Freight segment."

The firm lifted its target price on FedEx shares to $320 from $305.

Meanwhile, Loop Capital upgraded FedEx stock to Buy from Hold following the announcement and raised the price target to $365 from $288.

The moves come "in reaction to this value creating spin and recent pullback in the stock price," Loop analysts noted.

The parcel delivery giant reported second-quarter earnings of $4.05 per share, matching Wall Street estimates, and up slightly from $3.99 per share a year ago.

However, revenue for the quarter totaled $22 billion, falling short of the consensus estimate of $22.17 billion.

FedEx provided guidance for fiscal 2025 adjusted earnings per share in the range of $19.00 to $20.00, compared with the analyst consensus of $19.75.

TheMemphis-based delivery company has been going through a complex restructuring, which involves aggressive cost cutting. It said the permanent cost reductions from the DRIVE transformation program was of $2.2 billion.

Shares of rival UPS were also up nearly 1%.

Pratyush Thakur contributed to this report.

This content was originally published on Investing.com

Source: Baystreet The copyright of this article belongs to the original author/organization.
The views expressed herein are solely those of the author and do not reflect the stance of the platform. The content is intended for investment reference purposes only and shall not be considered as investment advice. Please contact us if you have any questions or suggestions regarding the content services provided by the platform.