FedEx Freight Stock Soars 15% as First Standalone Report Beats Estimates and Outlook Tops Wall Street Views

Shares of FedEx Freight surged nearly 15% on Friday after the newly independent trucking company delivered its first financial report as a standalone business, beating profit estimates and issuing an outlook above Wall Street forecasts.

FedEx Freight stock rose $16.35, or 14.91%, to close at $126.04. The shares opened at $115.20, up from Thursday's close of $109.69.

Volume reached about 3.6 million shares, more than double the three-month average of about 1.5 million. The company's market value rose to about $18.8 billion.

The gain came even as the broader market slumped, with the S&P 500 down 1.82%.

First report as a standalone company

FedEx Freight, a North American less-than-truckload carrier, was recently spun off from FedEx. Its report covered a four-month transition period ended Sept. 30, as the company aligned its fiscal calendar after the separation.

For the third quarter, FedEx Freight reported adjusted earnings of $1.49 per share, beating the analyst consensus of $1.38. Revenue rose 12% from a year earlier to $2.46 billion.

Operating income fell 6.1% to $383 million. But adjusted operating income, which excludes separation-related and other one-time costs, rose 16.4% to $510 million, producing an adjusted operating margin of 15.5%.

Upbeat outlook

The company forecast adjusted earnings of 65 cents to 75 cents per share for the current quarter, above analysts' estimates of about 54 cents.

FedEx Freight said it expects improving volumes and pricing. Management highlighted what it described as the "strongest renewal pricing" in years, a sign that customers are accepting higher rates as contracts come up for renewal.

Pricing in focus

Pricing remains a key area to watch. Excluding fuel surcharges, revenue per hundredweight, a measure of pricing, rose just 0.3% in the quarter.

That lagged rivals. Old Dominion Freight Line, XPO and Saia raised base pricing by 3.6% to 5.8% last quarter, leaving FedEx Freight room to catch up, according to analysts. Management expects fuel-adjusted yields to rise in the December quarter.

Shares of rival less-than-truckload carriers also rose Friday. XPO gained about 3.3%, Saia rose about 1.4% and Old Dominion edged up about 0.6%.

Analysts mixed

Analysts have been divided on the stock in recent weeks. Before the report, Stifel cut its price target to $129 from $160, while Truist lowered its target to $115 from $155. Raymond James reaffirmed an outperform rating with a $165 target, and BMO Capital Markets set a $130 target.

Overall, most analysts covering the stock rate it a buy.

A difficult year

Despite Friday's surge, FedEx Freight shares remain down about 16.5% over the past 52 weeks.

The stock has struggled amid a prolonged slowdown in freight demand, as weak manufacturing and housing activity have weighed on trucking volumes across the industry.

Some analysts have also pointed to the company's leveraged balance sheet. FedEx Freight carries about $6.15 billion in long-term debt and capital leases.

The shares trade at about 28.8 times trailing earnings.

What's next

Investors will focus on whether FedEx Freight can deliver the pricing improvements it expects and whether freight volumes recover in the coming months.

The company's ability to operate efficiently as a standalone business, separate from its former parent, will also be closely watched.

For now, Friday's results gave investors a reason for optimism about the company's future as an independent carrier.