FedEx Corporation To Spin-Off FedEx Freight Business In 1H26

FedEx Freight Overview - FedEx Freight is a leading North American provider of LTL freight services, offering FedEx Freight Priority, FedEx Freight Economy, and FedEx Freight Direct to meet diverse customer needs [1] - The segment generated $9.4 billion in revenue in FY24 and serves virtually every U.S. ZIP Code, including Alaska and Hawaii, with industry-leading transit times [1] - Internationally, FedEx Freight operates in Canada and Mexico, offering cross-border and intra-country LTL services [1] Financial Performance - For 2Q25, FedEx Freight segment revenue was $2.2 billion, down 11.2% YoY, primarily due to lower shipment volumes and reduced yields [14] - Operating income for 2Q25 dropped 36.5% YoY to $312 million, with operating margin declining 570 bps to 14.3% [14] - For 1H25, FedEx Freight revenue was $4.5 billion, down 6.8% YoY, with operating income falling 22.8% YoY to $751 million [15] Strategic Spin-Off - FedEx announced the spin-off of its Freight business to create a new publicly traded company, aiming to unlock market value and achieve a premium valuation similar to competitors like Old Dominion Freight Line [8] - The spin-off is expected to enhance operational focus, accountability, and agility for both FedEx and FedEx Freight, with an estimated enterprise value of $30-35 billion [8][9] - Post-separation, FedEx Freight will be the largest LTL carrier with a 17% market share and the broadest network in the industry [10] Operational Highlights - FedEx Freight operates nearly 30,000 motorized vehicles from approximately 360 service centers and employs around 40,000 people [20] - The segment has maintained its leading market share position while increasing operating profit by nearly 2% annually over the last five years, with 1,100 basis points of operating margin expansion [10] - FedEx Freight Direct addresses the growing e-commerce market for big and bulky products, offering flexible delivery windows and end-to-end visibility [20] Company-Wide Financials - For 2Q25, FedEx recorded revenue of $21.97 billion, down 0.9% YoY, with operating income declining 17.6% YoY to $1.05 billion [3] - Net income for 2Q25 was $741 million, down 17.7% YoY, with diluted EPS of $3.03, down 14.6% YoY [3] - For 1H25, FedEx revenue was $43.5 billion, down 0.7% YoY, with operating income falling 22.8% YoY to $2.1 billion [21] Outlook and Initiatives - FedEx revised its FY25 outlook, expecting flat revenue YoY and diluted EPS of $16.45-$17.45, excluding MTM adjustments [7][16] - The DRIVE transformation program is expected to create $4 billion in cost savings by FY25, while Network 2.0 aims to generate $2 billion in savings by FY27 [10] - FedEx plans to repurchase an additional $500 million of common stock in FY25, bringing the total buyback to $2.5 billion [17] Industry Position - FedEx Freight is positioned to benefit from a strong balance sheet and deep customer relationships, maintaining its leadership in the LTL market [10] - The spin-off aligns with FedEx's strategy to reduce capital intensity, increase capital returns, and focus on operational efficiency [10] - FedEx Freight's separation is expected to provide unique investment profiles for both entities, preserving operational and technological synergies [9]