Spinoff of FedEx Freight anticipated by June 2026
FedEx Freight, the nation's largest less-than-truckload carrier, announced plans to become a standalone public company by June 2026. The company's new CEO, John Smith, will lead the separation, which will see FedEx Freight listed on the New York Stock Exchange under the ticker FDXF.
The planned separation comes as FedEx Freight reported a 280 basis points increase in its operating ratio for the quarter, reaching 84%. This increase was due to lower revenue and a 100-basis-point increase in salaries, wages, and benefits expenses. Despite the increase, the company's revenue for the quarter was $22.2 billion, $550 million ahead of expectations.
The revenue decline of 3.1% year over year for FedEx Freight was accompanied by a 2.5% decrease in tonnage per day and a 0.6% drop in revenue per hundredweight, or yield. However, yields for FedEx Freight are expected to improve modestly year over year in the back half.
The parent company, FedEx, reported consolidated adjusted earnings per share of $3.83 for its fiscal first quarter ended Aug. 31. This is 22 cents higher than the consensus estimate and 23 cents higher year over year. Shares of FDX were up 5.4% in after-hours trading on Thursday.
In preparation for the spinoff, FedEx will spend $600 million enhancing its IT infrastructure and systems. The sales staff at FedEx Freight is expected to double to 400 before the June separation.
The Purchasing Managers' Index (PMI) registered a 48.7 reading for August, placing it in negative territory for 32 of the past 34 months. Despite this, the PMI new orders subindex moved into expansion territory (51.4) after six consecutive months of decline, although it remains below the required threshold of 52.1 for sustained increases in manufacturing orders.
FedEx Freight recently announced a general rate increase of 5.9% on average, effective Jan. 5. The unit's full-year operating margin is expected to see modest year-over-year deterioration. FedEx Freight's revenue for the fiscal year ending May 31 is forecast to increase by a low-single-digit percentage year over year.
With the spinoff, FedEx Freight will join the ranks of other standalone publicly traded companies, marking a significant step in the company's evolution. The separation is expected to provide FedEx Freight with increased focus and flexibility to pursue its growth strategies and better serve its customers.
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