UBS is sticking with a Buy rating on FedEx Corp (NYSE:FDX, XETRA:FDX) and a price target of $445, as the company gets ready to spin off its freight business into a standalone stock next week.
The freight unit, set to trade under the ticker FDXF, enters when-issued trading on May 27, with regular trading kicking off June 1. UBS put an implied value of $213 per share on FDXF and $338 per share on the remaining parcel business, which will be known as FEC.
The bank used a sum-of-the-parts framework to arrive at the updated target, replacing a simpler method that had applied a single 17x earnings multiple to blended CY2027 estimates.
For the parcel business, UBS applied a 7.4x EV/EBITDA multiple to CY2027 estimates, a 10% premium to the UPS and DHL average but still below UPS’s own 8.4x.
The freight unit was valued at 19.6x EV/EBITDA, in line with less-than-truckload peers Old Dominion, Saia, and XPO.
UBS is forecasting CY2027 earnings per share of $22.60 for FEC and $5.45 for FDXF. Those figures imply P/E multiples of 15x and 39x respectively, putting FEC about 10% above UPS on that basis and FDXF modestly above the roughly 37.5x average for its LTL peer group.
The core story for both companies comes down to margin improvement. UBS sees FEC’s operating ratio tightening to 92.1% in CY2027 from 93.0% in fiscal 2026, helped along by the ongoing merger of the Express and Ground networks in the US. FDXF’s ratio is expected to improve to 87.2% from 88.7%, with technology investment and an expanded sales force as the main drivers.
On the revenue side, UBS modeled growth of 5.7% for FEC and 7.7% for FDXF in CY2027, reflecting a gradually improving freight cycle and steady conditions for the parcel business.
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