How Should You Play FDX Stock Post Plans of Freight Unit Spinoff?

Core Viewpoint - Long-term investors prioritize underlying fundamentals over short-term quarterly results, and FedEx (FDX) demonstrates strong fundamentals supported by its operating model [1] Financial Performance - FDX's Q2 earnings showed mixed results, with adjusted earnings per share of $4.05 beating estimates but revenues of$21.9 billion falling short of the $22 billion consensus [14][16] - The freight unit experienced a significant revenue decline of 11$2.2 billion, due to fewer shipments and lower fuel surcharges [5] - FDX revised its fiscal 2025 earnings and revenue forecasts, now expecting flat revenues year-over-year and adjusted earnings per share between $19 and$20 [6] Strategic Initiatives - The board announced plans to spin off the FedEx Freight unit, creating two publicly traded companies, which is expected to allow FDX to focus on its core business [7][15] - The spin-off process is anticipated to take 18 months and aims to preserve operational synergies between the two entities [19] - FDX's DRIVE program is projected to yield $4 billion in savings by fiscal 2025 through cost-reduction initiatives [24] Shareholder Value - FDX has been active in rewarding shareholders, raising its quarterly dividend by 10$1.38 per share and repurchasing $1 billion in shares during the fiscal second quarter [21][17] - The stock has gained significantly post-announcement of the spin-off, reflecting investor confidence [9] Market Position - FDX's shares have outperformed its industry and rival UPS over the past year, driven by cost-cutting measures [25] - The company's current valuation is attractive, trading at lower levels than its industry average, with a Value Score of A [26]