FedEx Freight (NYSE:FDXF) shares traded around $152 on Tuesday afternoon after Bank of America initiated coverage of the newly independent less-than-truckload (LTL) carrier with a ‘Buy’ rating and a $185 price target.
The initiation comes one day after FedEx Freight was spun off from FedEx Corp (NYSE:FDX, XETRA:FDX), with FedEx retaining a 19.9% ownership stake.
Bank of America described FedEx Freight as the largest LTL carrier in North America, holding an estimated 16% market share and a market capitalization of roughly $28 billion.
The analysts see the company as positioned to unlock value as a standalone business through cost reductions, technology investments tailored specifically to LTL operations, and pricing improvements as it moves away from bundled shipping discounts previously tied to its parent company.
Bank of America highlighted management's medium-term targets of 4% to 6% annual revenue growth and 10% to 12% operating income growth. The firm also noted FedEx Freight's goal of increasing operating margins to approximately 15%, compared with an estimated 11% margin as a standalone company today.
The bank expects margin expansion to be a key earnings driver, projecting annual earnings growth of more than 20% between 2026 and 2028. The analysts pointed to planned productivity gains from the company's expanded salesforce and the elimination of transitional service agreement costs following the separation.
FedEx Freight operates a network of 355 terminals across North America and, according to Bank of America, offers transit times that are faster than many competitors on a significant portion of shipping lanes.
The company is also targeting growth in several end markets, including small and medium-sized businesses, healthcare, grocery distribution, and data center infrastructure. The bank’s analysts believe these segments represent opportunities to improve profitability and narrow pricing gaps with industry peers.
Bank of America's $185 price target is based on a valuation of 35 times its estimated 2027 earnings per share of $5.30.
The firm said the multiple is broadly in line with other major LTL carriers, including XPO, Old Dominion Freight Line and Saia, while reflecting FedEx Freight's potential for margin improvement and profitable growth as an independent company.