FedEx Keeps Finding Ways to Unlock Value, McNally Says

Summary

Peter McNally of Third Bridge analyzes FedEx's latest earnings beat and guidance. He discusses the planned freight spinoff as a value unlock, ongoing cost-cutting, the lack of volume growth, and the potential for operational leverage to drive margin expansion when the economy supports stronger shipping demand.

• FedEx beat fiscal Q4 estimates and projected profit growth, suggesting cost-cutting is working.
• The company plans to spin off its freight business into a separately traded stock to unlock value.
• Years of restructuring, buybacks, and capex efficiency have created a leaner company, but top-line volume growth has not yet materialized.
• FedEx has an opportunity to gain market share from UPS, which continues to struggle.
• When volume growth eventually returns, operational leverage could drive a massive increase in margins.
• The stock is up about 80% over the past year but dipped on a softer guidance, reflecting high expectations.