FedEx, which is valued at its lowest level in ten year, announced the death of its charismatic founder Fred Smith a few days ago, FY 2025 is in line with the previous year. After three consecutive years of decline, revenue has stabilized, although operating profit has fallen from $5.5bn to $5.2bn, mainly due to its road transport segment.
The world's leading express logistics operator had just announced its intention to divest this segment. The latter, which is the US leader in the groupage transport market, accounts for one-tenth of consolidated revenue but between a quarter and a third of operating profit.
FedEx is therefore refocusing on its backbone of 11 airport hubs—eight in North America, three in Europe, and two in China—and its fleet of 710 aircraft, accompanied by a genuine slimming program.
It is true that, as things stand, FedEx's market valuation at fourteen times profits very likely underestimates the sum of its parts. Competitors in the road transport division, such as Old Dominion, are, for example, listed on the stock market at more than thirty times their profits.
In this regard, it is naturally tempting to separate the road transport segment and let it evolve independently. The range is wide because there are still many unknowns—notably the debt that its parent company will transfer to it—but Zonebourse estimates that the spin-off could command a valuation of between $30bn and $40bn.
Compared to FedEx's market capitalization of $54bn, this amount largely justifies the group's restructuring. Over the last twelve months, it returned just under $4bn to its shareholders—two-thirds of which was through share buybacks—which is $1bn more than the free cash flow generated over the year.
