BofA Securities Starts FedEx Freight Holding Company (FDXF) at Buy
BofA Securities analyst Ken Hoexter initiates coverage on FedEx Freight Holding Company (NYSE: FDXF) with a Buy rating and a price target of $185.00.
The analyst commented: "We initiate coverage of FedEx Freight (FDXF), the largest less-than-truckload (LTL) carrier with an approximate 16% market share and $28 billion market cap, with a Buy rating and a $185 PO. FDXF (80.1%) is being spun-out of FedEx Corp (holding 19.9%), where it represented ~9% of revs (~$9 bil/year) and ~15% of operating income (~$1 bil). The business underwent meaningful overhaul under president & CEO John Smith during his prior tenure leading Freight (‘18-‘21); we view his return as supportive of execution as it transitions to a standalone entity. We see FDXF as primed to unlock value post separation through a leaner cost structure, refine its technology for a LTL-only network, see productivity gains as its new 500+ person salesforce matures, and unwind bundled discounts that constrained its revenue potential. Over the medium-term, management targets what we view as conservative growth, including 4%-6% revenue CAGR and 10% 12% operating income CAGR, while improving its operating margin to 15% from 12% as a ‘FedEx Freight segment,’ (equates to an 11% FDXF stand-alone starting point, in our view). With a target for 100-150 bps of margin improvement annually, and elimination of a 50 bps TSA headwind, we see earnings climbing at a 20%+ CAGR from 2026-2028."
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Shares of FedEx Freight Holding Company closed at $160.37 yesterday.