FedEx: no euphoria over proposed demerger

(CercleFinance.com) - After gaining nearly 7% at the start of the session, FedEx shares turned downward on Friday morning, with the courier company's earnings warning outweighing the announcement of the forthcoming demerger of its air freight business.


About an hour after opening, the stock dropped by nearly 1%, while the S&P 500 index posted a gain of around 0.5% at the same time.

FedEx announced last night that it intends to split into two companies by spinning off FedEx Freight, its large shipment handling and freight forwarding division, which will go public within 18 months.

UBS analysts comment: "This will create value for shareholders in the medium term, given that the shipping business is better valued than the parcel delivery business".

"Our valuation by the sum of the parts suggests significant potential for value creation, coming out at $348 per share", add BofA's teams.

By way of comparison, FedEx shares closed at around $275 last night.

On the occasion of its quarterly results, however, the Memphis, Tennessee-based group lowered its earnings-per-share (EPS) target for the current fiscal year 2024/2025.

The company said it now expects only an annual profit of between $19 and $20 per share, compared with a previous forecast of between $20 and $21 per share.

Sales are expected to be stable compared with fiscal 2023/2024, rather than up by less than 5%.

In its second fiscal quarter, which ended at the end of November, FedEx saw its sales fall to $22 billion, compared with $22.2 billion a year earlier, while net income improved from $3.99 billion to $4.05 billion year-on-year.

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