JPMorgan starts FedEx Freight at Overweight on post-spin turnaround

Investing.com -- In a note to clients on Tuesday, JPMorgan initiated coverage of FedEx Freight with an Overweight rating and a December 2027 price target of $160, arguing the recent spin-off gives North America's largest less-than-truckload carrier room to improve profitability and service as a stand-alone company.

Analyst Brian Ossenbeck said the business had been constrained as a small part of FedEx, the world's largest air cargo carrier, and had lost market share over the years.

The analyst believes the separation now allows Freight to make the investments needed to improve customer service.

"There is no quick fix for Freight as it will take time to ramp up a dedicated salesforce and transition from legacy systems," Ossenbeck wrote, adding that he was confident management would continue to run a best-in-class operation while narrowing the gap with pure-play peers.

He framed the company's service shortfall as "fixable, not structural," noting Freight had ranked as an "Inferior" offering on the Mastio Value Map for four straight years because of back-office and commercial issues rather than operational performance.

A new pricing platform, dedicated website and in-house billing is expected to help close that gap and support yield and share gains over time.

JPMorgan calculates incremental stand-alone costs of about $100 million in 2026, rising to roughly $150 million in 2027, driven by duplicative transition fees and technology spending that should begin to unwind in the second half of 2027.

The $160 target is based on 2028 earnings of $6.20 a share and a 26-times multiple, a discount to peers Old Dominion, XPO and Saia that JPMorgan expects to narrow as Freight executes.

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