On Friday, TD Cowen adjusted its outlook on FedEx Corporation (NYSE:FDX), raising the price target to $337 from the previous target of $328. The firm maintained a Buy rating on the stock. With a current market capitalization of nearly $67 billion and a P/E ratio of 16.9x, FedEx trades with notably low price volatility according to InvestingPro analysis.
The revision follows FedEx's announcement during its earnings report on Thursday about the spin-off of its freight business. This strategic move positions the company to become the largest public less-than-truckload (LTL) carrier by revenue.
The analyst at TD Cowen highlighted the potential for value creation through the spin-off, which is expected to more than compensate for the weaker performance in the company's core operations and a forecast reduction that was largely anticipated by the market.
Despite these challenges, FedEx has been recognized for its ability to manage costs effectively, with noted improvements in sequential cost savings. The company's financial health score on InvestingPro is rated as "FAIR," with particularly strong marks in profitability metrics. FedEx has maintained dividend payments for 23 consecutive years, demonstrating consistent shareholder returns.
The price target adjustment to $337 is a result of a sum-of-the-parts (SOTP) valuation, which now aligns more closely with the valuations of FedEx's industry peers. The analyst's statement emphasized the company's proactive measures in controlling what it can amidst broader operational headwinds.
FedEx's strategic decision to separate its freight segment is seen as a key step in unlocking additional value for the company and its shareholders. This move is particularly significant as it reshapes the competitive landscape of the LTL shipping market.
The stock's new price target of $337 reflects TD Cowen's confidence in FedEx's ability to navigate through current challenges and capitalize on the opportunities presented by the freight business spin-off. The Buy rating suggests that the firm views the stock as a favorable investment opportunity at this time.
In other recent news, FedEx has been the focus of multiple analyst adjustments following its Q2 results and announcement of a planned spinoff of its less-than-truckload (LTL) freight business. BMO Capital raised its price target to $330, acknowledging the company's cost reduction initiatives and strategic separation of the LTL segment.
Stephens lowered FedEx's target to $345 but maintained an Overweight rating, citing stronger profitability in FedEx Express and softer earnings in the Freight segment. Bernstein SocGen Group modestly increased FedEx's target to $320, acknowledging the mixed picture due to challenges in the Freight segment and upcoming spinoff costs. Loop Capital upgraded FedEx to Buy and significantly raised the target to $365, factoring in operational efficiencies and anticipated benefits from the LTL Freight business spinoff.
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