Shares of FedEx Corp
BofA Securities analyst Ken Hoexter maintained a Buy rating on FedEx, while slashing the price target from $440 to $376. In a separate note, the analyst initiated coverage of FedEx Freight Holding Company with a Buy rating and price target of $185.
FedEx: The recently completed spin-off offers FedEx "significant cost-out potential as it eliminates overhead costs from its prior Freight segment," Hoexter said in the note. He added that the company continued to accelerate its internal improvement while combining its Express and Ground segments.
The analyst stated that FedEx had set conservative targets in February, reflecting CAGRs (compounded annual growth rates) of 4% in revenue and 14% in adjusted operating income between fiscal 2026 and calendar year 2029. Over this period of 3.5 years, FedEx expects to generate $16 billion in free cash, "yielding significant buyback potential (its targets exclude accretion from its InPost investment)," he further wrote.
FedEx Freight Holding: The company has a market share of approximately 16%, Hoexter said in the initiation note. The business had undergone "meaningful overhaul" under CEO John Smith during his prior tenure that ended in 2021 and his return will be support execution as the company transitions to a standalone entity, he added.
The analyst stated that FedEx Freight is "primed to unlock value" following the spin-off due to:
- Leaner cost structure
- Refining technology for an LTL-only network
- Productivity gains as its new salesforce matures
- Unwinding bundled discounts that previously constrained its revenue potential
