FedEx Upgrade by Loop Capital

Investing.com — Loop Capital upgraded FedEx Corp (NYSE:FDX) to "buy" from "hold", raising its price target to $365 from $288. This change factors in the value creation from the planned spin-off of its FedEx Freight division and a recent dip in the company's stock price.

FedEx shares increased over 7% in premarket trading.

The company plans to spin off FedEx Freight into a standalone public entity within 18 months, following a six-month review. Loop Capital considers this move a key value driver, projecting a 32% upside for FedEx shares based on a sum-of-the-parts valuation.

In its fiscal second quarter, FedEx reported adjusted earnings per share of $4.05, slightly exceeding analysts' expectations of $4.01. However, the company’s revenue fell 0.9% year-on-year, which was below consensus estimates.

FedEx's Express business posted a 13% increase in adjusted operating income, driven by higher revenue per package and improved margins. In contrast, the Freight unit faced difficulties, with operating income declining 23% due to weaker less-than-truckload volumes and shrinking margins.

FedEx also revised its full-year guidance, forecasting flat revenue growth compared to previous low single-digit expectations, and lowered its adjusted EPS estimate to $19-$20 from $20-$21.

While Loop Capital remains skeptical about FedEx's ability to maintain margin improvements in its core Express business, it identified the Freight spin-off as the main catalyst for its upgrade. Furthermore, the brokerage warned that potential U.S. tariffs in 2025 could adversely affect FedEx's outlook.