BofA Securities analyst Ken Hoexter maintained a Buy rating on FedEx Freight Holding Company (NYSE:FDXF) after its third-quarter results, citing stronger pricing, profitability, and higher transition-period guidance.
However, Hoexter lowered his price forecast to $137 from $140, citing peer multiple compression and a more uncertain freight-volume environment.
The target implies about 24.9% upside from the report’s $109.69 reference price.
Earnings Beat Supports BofA’s View
FedEx Freight reported adjusted third-quarter EPS of $1.49, above BofA’s $1.39 estimate.
Tons per day were roughly flat year over year, while shipments per day fell 0.7%, better than Hoexter’s forecast for a 3% decline.
Revenue per hundredweight increased 8.8% including fuel and 0.4% excluding fuel, both slightly ahead of BofA’s expectations.
Operating income rose 12% year over year to $358 million, producing a 14.7% operating margin. Hoexter said fuel-related gains contributed to the upside.
Higher Guidance Lifts Q4 Outlook
FedEx Freight raised its transition-period adjusted operating income outlook to $695 million-$715 million from $605 million-$645 million.
The company also raised its adjusted operating margin target to 12.5%-12.7% from 11.5%-12.0%.
BofA said the improvement is being driven primarily by yield rather than volume.
The firm estimates net yield will contribute about 370 basis points to the transition-period margin versus 2025, while volume adds only about 5 basis points, helping offset variable compensation, transition-service-agreement costs and other headwinds.
For the fourth quarter, management guided to adjusted EPS of $0.65-$0.75.
Hoexter noted that the midpoint is about 22% above BofA’s prior $0.57 estimate, prompting him to raise his forecast to $0.70.
Peer Discount Remains
Hoexter values FedEx Freight at 26.5 times estimated 2027 EPS, below XPO Inc. (NYSE:XPO) at 33 times, Old Dominion Freight Line Inc. (NASDAQ:ODFL) at 28.5 times and Saia Inc. (NASDAQ:SAIA) at 29 times.
BofA said the discount reflects FedEx Freight’s lower expected volume growth and margins relative to peers. Hoexter still sees room for FedEx Freight to narrow the margin gap through a leaner cost structure and the unwinding of bundled discounts.
FDXF Price Action: FedEx Freight shares were up 15.54% at $126.74 at the time of publication on Friday, according to Benzinga Pro data.
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