Key points:

  • The company forecast earnings in the range of $20-$22 per share, which is higher than analysts’ forecasts.
  • FedEx values ​​its LTL division at $30 billion.
  • The stock hit a 52-week high after releasing an upbeat outlook for fiscal 2025.

On Wednesday, June 26, FedEx shares saw a sharp rally, soaring 15%. The positive dynamics of quotes was caused by two key factors.

First, the company reassured investors by presenting an optimistic annual profit forecast. Second, FedEx announced it is considering selling or spinning off its freight division. Analysts, valuing the unit at $30 billion, believe the spinoff could be a catalyst for further growth in FedEx’s stock price.

What drove FedEx’s growth?

A day earlier, shares of the logistics conglomerate rose 14% on Tuesday to hit a session and 52-week high of $294.75 after the company released upbeat guidance for its 2025 fiscal year.

CEO Raj Subramaniam said FedEx expects earnings in the range of $20-$22 per share, slightly above analysts’ forecasts. He also emphasized that the company will continue to improve efficiency, achieved through the merger of air and ground delivery divisions, staff reduction, and optimization of the use of warehouse space and aircraft fleet. These measures, according to Subramaniam, will have a positive impact on FedEx’s financial performance throughout the 2025 fiscal year, which ends in May 2025.

It is worth noting that FedEx’s rise has outpaced that of its main competitor, United Parcel Service, whose shares rose 2.6% on Tuesday. Over the past 12 months, FedEx shares are up 10%, while UPS shares are down 20%.

Company restructuring

FedEx is implementing a major restructuring with two key goals:

  • First, improve profitability, which has recently lagged behind its main competitor, the unionized United Parcel Service.
  • Second, to strengthen the company’s position in the face of growing competition from‘s logistics division.

As part of its strategic plan, FedEx is overhauling its FedEx Freight business, known as LTL (less-than-truckload) shipping. It is the largest LTL division in North America. It brought in $2.3 billion in revenue in the most recent quarter, showing earnings growth despite a two-year downturn in the U.S. freight market.

FedEx’s LTL division, once an underdog, has gradually become the most profitable segment in the company’s portfolio. Its comparable valuation is nearly double FedEx’s overall valuation. Jefferies analyst Stephanie Moore estimates the value of FedEx’s cargo business at $30 billion.

The restructuring of the LTL division includes a number of initiatives aimed at improving efficiency and profitability. These include:

  • Cost reduction: FedEx is optimizing delivery routes, consolidating terminals and introducing new technologies to improve operational efficiency.
  • Expansion of services: The LTL division is expanding its service offerings, including last mile delivery and e-commerce, to reach a wider range of customers.
  • Technology investments: FedEx is investing in new technologies, such as automation and artificial intelligence, to improve productivity and customer experience.