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FedEx Downgraded: LTL Spin-off Value Realized?
22 Jan
Summary
- Rothschild downgraded FedEx to Neutral, citing stock rally.
- LTL business separation is scheduled for June, nearing completion.
- Analyst price target suggests only a 3% upside from current levels.
Rothschild has downgraded FedEx Corporation (NYSE:FDX) to Neutral, indicating that the stock's significant 37% rally over the past three months has largely incorporated the expected value from the planned separation of its less-than-truckload (LTL) business. This separation is scheduled for June.
A recent sum-of-the-parts analysis by Rothschild estimates the combined value of FedEx's two future businesses at approximately $316 per share, a level close to current trading prices. This valuation supports a price target of $317, implying a limited upside of roughly 3%.
The LTL unit will become a standalone company, with Rothschild anticipating it will trade in line with peers, potentially creating around $10 billion in value. The remaining parcel business, retaining the FedEx name, has seen operational improvements. However, Rothschild notes a modest value erosion of about 6% for this legacy business post-spin-off, due to structural changes.
