FedEx (FDX.US) is scheduled to announce its second quarter earnings for the fiscal year 2025 on Thursday, and investors will look for any clues from the company's management about a possible spin-off of its Transportation division.
According to Zhizhong Finance APP, FedEx (FDX.US) is scheduled to announce its second quarter earnings for the fiscal year 2025 on Thursday, and investors will look for any clues from the company's management about a possible spin-off of its Transportation division.
Wall Street expects the delivery service giant to have an EPS of $3.94, representing a 1.3% year-on-year decline, while revenue is expected to decrease by 0.5% year-on-year to $22.1 billion.
Will long-term risks improve.
As postal service contracts expire, the company faces some headwinds. The revenue from its domestic and Global priority services has also declined by approximately 5%.
Additionally, President-elect Trump proposed a universal 10% tariff on all imported Commodities, with a 60% tariff specifically on China commodities.
Following the first quarter earnings announcement, FedEx indicated that its Business would slow down in the coming year, as customers shifted to cheaper Transportation services, which impacted the package giant due to a reduction in priority services. The release of a downward performance guidance unsettled investors, causing the stock to plummet over 10% on that day.
In the last quarter, FedEx found that an increasing number of price-sensitive customers are choosing slower and cheaper courier services, a trend that has also impacted United Parcel Service earlier this year. FedEx's Chief Customer Officer Brie Carere stated during the company's earnings report call that due to weak demand from businesses, the company's express delivery segment saw a 3% decline in domestic transportation volume in the USA.
Spin-off is Bullish.
Regarding the spin-off of the freight division, FedEx expects to announce the results of its strategic assessment by the end of the year.
Stifel believes that considering the widening spread in valuation compared to non-union LTL peers (i.e., the rationale for SOTP value is higher), the likelihood of a spin-off occurring is over 50%.
Stifel Analyst J. Bruce Chan stated: "This is a binary outcome and is not included in our data or Wall Street valuations. However, if it occurs, we believe the potential upside could be substantial, potentially increasing the stock price by about $100."
