J.P. Morgan Upgrades FedEx to Overweight Ahead of Spin-Off
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 2 days ago
0mins
Source: seekingalpha
- Spin-Off Outlook: FedEx is set to spin off its freight business on June 1, with shareholders receiving one share of FedEx Freight for every two shares of FDX owned, positioning the new entity as the largest North American LTL carrier for small and medium-sized businesses, enhancing market competitiveness.
- Rating Upgrade Impact: J.P. Morgan upgraded FedEx from Neutral to Overweight, valuing the remaining business at $460 per share, indicating significant upside potential from current levels and reflecting confidence in the company's future growth trajectory.
- EBITDA Multiple Increase: The analyst raised FedEx's FY27 EBITDA multiple to 14x, believing the spin-off will unlock substantial value by addressing long-standing limitations in customer-facing technology and commercial capabilities that have historically impacted service and yields.
- Target Price Increase: J.P. Morgan raised its target price for FedEx by 6.5% to $460, representing a 15% upside from Tuesday's close, signaling a positive market outlook for the company's future performance.
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Analyst Views on FDX
Wall Street analysts forecast FDX stock price to fall
20 Analyst Rating
13 Buy
6 Hold
1 Sell
Moderate Buy
Current: 411.400
Low
210.00
Averages
315.05
High
365.00
Current: 411.400
Low
210.00
Averages
315.05
High
365.00
About FDX
FedEx Corporation provides customers and businesses with a portfolio of transportation, e-commerce, and business services. The Company offers integrated business solutions utilizing its flexible and efficient global network. Its segments include Federal Express, FedEx Freight, and Corporate, other, and eliminations. Federal Express segment includes express transportation, small-package ground delivery, and freight transportation, and it also operates combined sales, marketing, administrative, and information-technology functions in shared service operations for United States customers. FedEx Freight segment includes FedEx Freight (LTL freight transportation) and FedEx Custom Critical (time-critical transportation). Corporate, other, and elimination segments include FedEx Dataworks, Inc. (FedEx Dataworks), FedEx Office and Print Services, Inc. (FedEx Office), and FedEx Logistics, Inc. (FedEx Logistics). FedEx Logistics offers customs brokerage, specialty transportation, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Spin-off Transaction: The spin-off of FedEx Freight is expected to be completed on the same day, allowing the parent company FedEx (FDX) to remain in the DJTA, which could unlock additional value for its remaining business and enhance market confidence.
- Index Weight Impact: American Airlines Group has a weight of less than 0.5% in the DJTA due to its low share price, and this change is anticipated to improve the overall performance and attractiveness of the index, reflecting a renewed focus on the transportation sector.
- Market Expectations: Analysts predict that the inclusion of FedEx Freight will enhance the overall value of the DJTA, with J.P. Morgan noting that the spin-off could unlock more potential value for FedEx's remaining business, further driving investor interest and confidence.
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- Separation Plan Advances: The FedEx board has formally approved the spin-off of its freight division, which is scheduled to begin trading on the NYSE on June 1, allowing shareholders to receive shares in the new company, potentially enhancing shareholder value significantly.
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- Spin-off Completion: FedEx Corporation anticipates completing the spin-off of FedEx Freight on the same date, ensuring that the parent company remains in the DJTA, thereby maintaining its market position.
- Index Impact Analysis: The Dow Jones Transportation Average is a price-weighted index, where low-priced stocks have an immaterial impact, and this change may attract more investor focus on FedEx Freight's future performance.
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- Constituent Change: FedEx Freight Holding Company (FDXF) will replace American Airlines Group (AAL) in the Dow Jones Transportation Average effective June 1, 2026, prior to market open, marking a significant restructuring and optimization in the transportation sector for FedEx.
- Spin-off Transaction: The spin-off of FedEx Freight is expected to be completed on the same day, allowing the parent company FedEx (FDX) to remain in the DJTA, which could unlock additional value for its remaining business and enhance market confidence.
- Index Weight Impact: American Airlines Group has a weight of less than 0.5% in the DJTA due to its low share price, and this change is anticipated to improve the overall performance and attractiveness of the index, reflecting a renewed focus on the transportation sector.
- Market Expectations: Analysts predict that the inclusion of FedEx Freight will enhance the overall value of the DJTA, with J.P. Morgan noting that the spin-off could unlock more potential value for FedEx's remaining business, further driving investor interest and confidence.
See More
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- Escalation of US-Iran Conflict: Following weeks of paused action, the US and Iran have resumed airstrikes, complicating hopes for a permanent resolution to the conflict, which is impacting global oil supplies and market sentiment.
- Strong Stock Market Performance: Despite rising geopolitical tensions, both the S&P 500 and Nasdaq Composite closed at record highs, primarily driven by a surge in AI-related stocks, indicating strong market confidence in the technology sector.
- Oil Price Warning: ExxonMobil has warned that oil inventories are on track to reach dangerously low levels in the coming weeks, forcing prices to spike and curbing demand, reflecting market concerns over energy supply.
- Wealthy Investors Pulling Out: According to the UBS Global Family Office Report, 60% of family offices plan to adjust their investment allocations in the next year, with many reducing US holdings and increasing exposure to emerging markets, highlighting a growing trend of 'de-dollarization'.
See More
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- Tesla Robotaxi Expansion: Morgan Stanley reiterates Tesla as equal weight, noting survey checks indicate increased hiring of 'AI Safety Operators' in northern metro areas, suggesting Tesla is gearing up for robotaxi operations expansion, which could enhance future revenues.
- National Health Properties Outlook: Citizens initiates coverage of National Health Properties as outperform, believing the REIT is enhancing organic growth by increasing exposure to Senior Housing Operating Properties, indicating confidence in the senior living market.
- Nvidia Data Center Potential: Bernstein reiterates Nvidia as outperform, highlighting the enormous and still early datacenter opportunity, which is expected to provide significant upside, reflecting optimism in tech stocks.
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- Fast Track Index Inclusion: FedEx Freight is set to join both the S&P 500 and the Dow Jones Transportation Average in early June, replacing EPAM Systems, marking one of the fastest index inclusions for a newly independent firm and highlighting its scale within the North American trucking industry.
- Separation Plan Advances: The FedEx board has formally approved the spin-off of its freight division, which is scheduled to begin trading on the NYSE on June 1, allowing shareholders to receive shares in the new company, potentially enhancing shareholder value significantly.
- Analyst Rating Upgrade: JPMorgan upgraded FedEx's rating from “Neutral” to “Overweight” and raised its price target from $432 to $460, indicating that the current stock setup offers a favorable risk-reward balance as operational changes gain traction.
- Retail Investor Sentiment Shift: On Stocktwits, retail sentiment around FedEx shifted from ‘neutral’ to ‘bullish’, with users noting that the spin-off will allow the company to focus on its
See More
Changes to S&P 500 and SmallCap 600 Indices Announced
- S&P 500 Changes: FedEx Freight Holding will replace EPAM Systems in the S&P 500 effective June 2, following a spin-off transaction expected to complete on June 1, ensuring FedEx remains in the index and solidifying its market position.
- SmallCap 600 Adjustments: EPAM Systems will take the place of Shutterstock in the S&P SmallCap 600, reflecting the dynamic shifts in the small-cap market and potentially impacting investor confidence in the index.
- Acquisition Activity: Shutterstock is anticipated to be acquired, a transaction that could affect its market performance, prompting investors to monitor the potential impact on its stock price.
- Dave Inc. Listing: Dave Inc. will replace American Woodmark Corp. in the S&P SmallCap 600 prior to June 1, indicating the vibrancy of the small-cap market and its appeal to emerging companies, potentially offering new investment opportunities for investors.
See More
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- Constituent Change: FedEx Freight Holding Company will replace American Airlines Group in the Dow Jones Transportation Average effective June 1, 2026, which is expected to enhance the overall performance and market attention of the index.
- Spin-off Completion: FedEx Corporation anticipates completing the spin-off of FedEx Freight on the same date, ensuring that the parent company remains in the DJTA, thereby maintaining its market position.
- Index Impact Analysis: The Dow Jones Transportation Average is a price-weighted index, where low-priced stocks have an immaterial impact, and this change may attract more investor focus on FedEx Freight's future performance.
- Market Reaction Expectations: With FedEx Freight becoming part of the Dow Jones Transportation Average, it is expected to enhance its market recognition, potentially leading to a positive impact on its stock price and further boosting investor confidence.
See More
