FedEx Corp (NYSE:FDX) hosted its analyst day on Thursday ahead of the spinout of its largest less-than-truckload (LTL) carrier, FedEx Freight (FDXF).

The company announced medium-term targets, which appear to be "fairly conservative and achievable," according to BofA Securities analyst Ken Hoexter.

The Analyst: Hoexter maintained a Buy rating and price target of $440.

The Thesis: The company is on track to complete the spinoff of FedEx Freight on June 1, Hoexter said in the note.

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FedEx Freight generated $8.6 billion in revenues, representing 9% of the company's total revenues and 15% of its operating income, he added.

The analyst mentioned that the company's medium-term targets:

  • Revenue CAGR (compounded annual growth rate) of 4%-6%
  • Adjusted operating income CAGR of 10%-12%
  • Margin expansion to around 15%
  • Capex to revenues of ~5%
  • Free cash flow of more than $1 billion
  • Free cash flow conversion of over 90%

"As FedEx Freight posted 19%+ margins in F23-F24 (pre-independent co costs), we believe its margin target could prove conservative," he wrote.

Following the spinoff, the company would focus on healthcare, grocery, data center infrastructure, and small to medium-sized businesses (SMBs), Hoexter further said.

FDX Price Action: Shares of FedEx had risen by 0.25% to $374.35 at the time of publication on Thursday.

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