FedEx Spins Off Freight, Express Remains Strong; Wait for Better Entry

What happened

FedEx shares have risen 13% year-to-date but pulled back 15% over the past month, as the company completed its tax-free spinoff of FedEx Freight on June 1. The remaining express and ground segments continue to show strength, driven by higher revenues per package and U.S. volumes, supporting a favorable outlook for the upcoming Q4 results. However, the DeepValue report maintains a WAIT rating, noting that at $353, the stock trades at ~19.5x FY26 EPS, pricing in successful cost savings and the spin while macro and execution risks persist. The report sees fair value at $360 in the base case but warns of downside to $270 if LTL weakness and tariff headwinds offset savings. The recent price weakness does not yet change the risk-reward; a pullback to ~$300 or clearer evidence of sustained 8%+ margins post-spin would offer a more attractive entry.

Implication

Long-term investors should use the WAIT rating as a guide: maintain existing positions but do not add. The thesis is intact, with structural margin expansion and the spinoff potentially unlocking value, but entry at current levels offers limited upside against known risks. Wait for either a deeper pullback toward $300 or post-spin quarterly results that confirm operating margin improvement to 8%+ before increasing exposure.

Thesis delta

Thesis remains unchanged. The completion of the FedEx Freight spinoff on June 1 is a tactical milestone that was already anticipated in the report's base case. The report continues to see asymmetric risk to the downside at current prices, with a base case value of $360 offering only ~2% upside. The article's optimism about express segment strength does not alter the overall assessment that the stock already prices in that strength, leaving limited room for positive surprises. The core thesis—wait for a better entry or evidence of sustainable high margins—remains valid.