FedEx Corporation (FDX +2.09%) stock crashed nearly 19% through 11:15 a.m. ET this morning -- but don't panic. This apparent disaster isn't what meets the eye.
Instead of a sell-off, what you're seeing is a spin-off.
Image source: Getty Images.
FedEx delivers Freight to investors
Specifically, a spin-off of FedEx's less-than-truckload (LTL) -weight freight-hauling business, FedEx Freight (NYSE: FDXF), which became its own separate company today.
Each owner of FedEx stock receives one share of FedEx Freight common stock for every two shares of FedEx common stock they held as of the close of trading on May 15. All these combined add up to 80.1% of FedEx Freight's shares outstanding, with FedEx proper retaining -- for the time being -- 19.9% of the shares as a minority interest in its former subsidiary.
NYSE: FDX
Key Data Points
What it means for FedEx
Over the next 24 months, FedEx intends to dispose of the remaining 19.9% of FedEx Freight shares, which may put selling pressure on FedEx Freight stock. As for what FedEx proper investors can expect, well, last year FedEx Freight accounted for $8.9 billion of FedEx's $87.9 billion in total revenue -- so expect that to go away, reducing revenue by about 10.1%, and making it harder for FedEx to hit analysts' forecast goal of $93.7 billion in revenue this year.
FedEx Freight also produced $1.5 billion of FedEx's $5.2 billion in operating profit last year -- 28.5%, according to S&P Global Market Intelligence data -- so you can probably expect to see a decline in FedEx's profit margin without FedEx Freight around to support it.
On a brighter note, FedEx Freight profits have been declining the past two years, while FedEx proper's profits have been growing. In a perfect world, this trend would continue and a FedEx more focused on its core business would prosper.
Fingers crossed.
