FDXF FedEx Freight
Scale LTL network, real moat, but margins keep sliding — market is pricing the recovery, not the results.
The story
FedEx Freight is the largest US LTL carrier, spun off with a dense pickup-and-delivery network that is a real scale moat versus regional players. But it's mid-cycle in a freight recession: operating margin has slid from 18.8% to 15.1% annually and now just 11.7% TTM, and revenue has been shrinking (-6.1% 5y CAGR). The equity story is a margin-recovery turnaround, not a growth story, and the market is pricing in a lot of that recovery already.
TTM margin fell further to 11.7% (from 15.1% last full year), a material deterioration versus last update, so I cut y1 growth from 5% to 2% and stretched margin recovery from 7 to 8 years while trimming the target margin slightly to 16.5% — still LTL-industry-sustainable, not peak, and consistent with 'pricing shift' commentary rather than an assumed quick fix.
Value drivers
| Revenue growth (Y1) | 2.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 7y |
| Target operating margin | 16.5% |
| Years to target margin | 7 |
| Sales-to-capital | 1.17 |
| Beta | 1.10 |
| Failure probability | 2.0% |
| Cost of capital (WACC) | 9.6% |
| Terminal WACC | 9.1% |
Valuation bridge
| PV of explicit FCFF | 2.02B |
| PV of terminal value | 3.80B |
| Equity value | 5.81B |
| ÷ shares → per share | $39.04 |
News
bullish +0.60 · 8 articles
- FedEx (FDX) Could Be 10% Undervalued On Fresh Financing And Strong Q4 Results
- FedEx Freight Targets Margin Growth as LTL Demand and Pricing Shift
- FedEx Freight Stock Outlook After the Spin-Off and S&P 500 Debut
- Is FDXF Stock a Buy With Growth Targets Amid High Debt and Macro Risks
- Former FedEx CFO John Dietrich joins American Airlines board
- Jim Cramer Reveals Why FedEx Freight Holding Company, Inc. (FDXF) Might Go Higher
- Jim Cramer on FedEx Freight: “I Want to Own This One for the Long Haul”
- Old Dominion, J.B. Hunt, XPO Lead Sector in Market Cap Rankings
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 4.40B | 2.0% | 12.4% | 407.91M | 73.78M | 334.13M | 304.89M |
| 2 | 4.49B | 2.1% | 13.1% | 439.16M | 78.39M | 360.77M | 300.39M |
| 3 | 4.59B | 2.2% | 13.8% | 471.93M | 83.22M | 388.70M | 295.32M |
| 4 | 4.69B | 2.2% | 14.5% | 506.31M | 88.30M | 418.02M | 289.80M |
| 5 | 4.80B | 2.3% | 15.1% | 542.45M | 93.63M | 448.83M | 283.93M |
| 6 | 4.92B | 2.4% | 15.8% | 580.48M | 99.23M | 481.24M | 277.79M |
| 7 | 5.04B | 2.5% | 16.5% | 620.52M | 105.14M | 515.39M | 271.46M |
Key risks
- Freight recession persists and pricing gains don't materialize, stalling margin recovery below 16.5%
- Continued tonnage/revenue decline erodes network density benefits that justify the scale moat
- High debt load (1.44B) amid earnings compression limits reinvestment flexibility
Catalysts
- LTL pricing discipline and demand inflection cited in recent news flow
- Cost takeout and network optimization now unencumbered as a standalone S&P 500 company