BofA Securities analyst Ken Hoexter is sticking with his Buy rating on FedEx Freight Holding Company (NYSE:FDXF) after the company's third-quarter results, pointing to stronger pricing, better profitability, and higher transition-period guidance. But he did trim his price forecast to $137 from $140, citing peer multiple compression and a more uncertain freight-volume environment. The new target still implies about 24.9% upside from the report's $109.69 reference price.

Earnings Beat Supports BofA's View

FedEx Freight reported adjusted third-quarter EPS of $1.49, comfortably above BofA's $1.39 estimate. Tons per day were roughly flat year over year, while shipments per day fell 0.7%, which was actually better than Hoexter's forecast for a 3% decline. Revenue per hundredweight increased 8.8% including fuel and 0.4% excluding fuel, both slightly ahead of BofA's expectations. Operating income rose 12% year over year to $358 million, producing a 14.7% operating margin. Hoexter noted that fuel-related gains contributed to the upside.

Higher Guidance Lifts Q4 Outlook

FedEx Freight raised its transition-period adjusted operating income outlook to $695 million-$715 million from $605 million-$645 million. It also lifted its adjusted operating margin target to 12.5%-12.7% from 11.5%-12.0%. BofA said the improvement is being driven primarily by yield rather than volume. The firm estimates net yield will contribute about 370 basis points to the transition-period margin versus 2025, while volume adds only about 5 basis points, helping offset variable compensation, transition-service-agreement costs, and other headwinds.

For the fourth quarter, management guided to adjusted EPS of $0.65-$0.75. Hoexter noted that the midpoint is about 22% above BofA's prior $0.57 estimate, prompting him to raise his forecast to $0.70.

Peer Discount Remains

Hoexter values FedEx Freight at 26.5 times estimated 2027 EPS, below XPO Inc. (XPO) at 33 times, Old Dominion Freight Line Inc. (ODFL) at 28.5 times, and Saia Inc. (SAIA) at 29 times. BofA said the discount reflects FedEx Freight's lower expected volume growth and margins relative to peers. Still, Hoexter sees room for FedEx Freight to narrow the margin gap through a leaner cost structure and the unwinding of bundled discounts.

FDXF Price Action: FedEx Freight shares were up 15.54% at $126.74 at the time of publication on Friday, according to market data.