FedEx Freight (FDXF) CFO Marshall Witt expects operating income growth during the transition period to be led by higher yields and efficiency drivers, offsetting softer or stabilizing volumes as well as headwinds from variable compensation and transition service agreement costs, BofA Securities said in a note Friday.

CEO John Smith was encouraged by demand trends, including improving ISM metrics, truckload trends, and higher rates. He remains focused on exiting transition service agreements quickly to reduce costs and risks, leveraging AI to drive efficiencies, and enhancing service, according to the note.

FedEx Freight introduced the June to December transition period targets of 4% to 6% revenue growth, adjusted operating income of $605 million to 645 million, adjusted operating margins of 11.5% to 12.0%, and adjusted earnings per share of $2.40 to $2.60, the note added.

BofA raised its calendar year 2027 EPS estimate by 2% to $5.41 from $5.30.

The firm kept a buy rating on FedEx Freight and raised the price target to $187 from $185.

Shares of FedEx Freight were down more than 6% in Friday trading.

Price: 148.70, Change: -9.83, Percent Change: -6.20