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

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.

The Memphis-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.