FedEx sum-of-the-parts valuation points to upside as freight spin-off approaches, UBS says

The freight unit, acceptable to commercialized nether the ticker FDXF, enters when-issued trading connected May 27, with regular trading kicking disconnected June 1. UBS enactment an implied worth of $213 per stock connected FDXF and $338 per stock connected the remaining parcel business, which volition beryllium known arsenic FEC.

The slope utilized a sum-of-the-parts model to get astatine the updated target, replacing a simpler method that had applied a azygous 17x net aggregate to blended CY2027 estimates.

For the parcel business, UBS applied a 7.4x EV/EBITDA aggregate to CY2027 estimates, a 10% premium to the UPS and DHL mean but inactive beneath UPS's ain 8.4x.

The freight portion was valued astatine 19.6x EV/EBITDA, successful enactment with less-than-truckload peers Old Dominion, Saia, and XPO.

UBS is forecasting CY2027 net per stock of $22.60 for FEC and $5.45 for FDXF. Those figures connote P/E multiples of 15x and 39x respectively, putting FEC astir 10% supra UPS connected that ground and FDXF modestly supra the astir 37.5x mean for its LTL adjacent group.

The halfway communicative for some companies comes down to borderline improvement. UBS sees FEC's operating ratio tightening to 92.1% successful CY2027 from 93.0% successful fiscal 2026, helped on by the ongoing merger of the Express and Ground networks successful the US. FDXF's ratio is expected to amended to 87.2% from 88.7%, with exertion concern and an expanded income unit arsenic the main drivers.

On the gross side, UBS modeled maturation of 5.7% for FEC and 7.7% for FDXF successful CY2027, reflecting a gradually improving freight rhythm and dependable conditions for the parcel business.