FedEx (NYSE: FDX) completed the spinoff of its FedEx Freight business (NYSE: FDXF) on June 1, making FedEx Freight a separate, less-than-truckload (LTL) business focused on short-distance deliveries.
The point is to unlock shareholder value as both companies can focus on their own concerns
FedEx operates more than 650 planes as the world’s largest express air cargo carrier and delivers to more than 220 countries. Its shares are up more than 45% so far this year, but fell 17% on the first trading day since the spinoff, while FedEx Freight’s shares dropped more than 6%. Despite the recent slide, there are three good reasons to buy FedEx stock now.
It has higher margins ahead The move simplifies FedEx’s cost-cutting plans to improve profitability. Managing a massive hybrid network of overnight air express, ground parcel, and heavy freight leads to complexity. By spinning off its freight division, FedEx can more easily introduce its Network 2.0 initiative, which combines its express and ground sorting networks while using artificial intelligence (AI) and automation to a greater extent.