FedEx Freight’s results were pressured in the fiscal quarter that concluded on Feb. 28 as the company continued an initiative to enhance revenue quality. The focus on higher-value shipments, however, is occurring amid a muted demand backdrop. Shipment declines in the period were only partially offset by higher shipment weights and yields. Further, incremental costs associated with a planned separation from parent FedEx Corp. were again an overhang.
However, all eyes will be on an Apr. 8 investor day in New York City, where it will provide long-term revenue and margin targets. The spin off of the LTL business is scheduled for June 1. Shares of FedEx Freight will be listed on the New York Stock Exchange under the ticker FDXF.
The company completed a $3.7 billion debt offering as part of the transaction in January.
Table: FedEx Freight’s key performance indicators
FedEx Freight reported a 4.7% y/y revenue decline to $1.99 billion in the recent quarter as tonnage fell 4.8% and revenue per hundredweight (yield) was up 0.2%. The tonnage decline resulted from a 5.7% drop in shipments, which was partially offset by a 1% increase in weight per shipment. The increase in shipment weight was a modest headwind to the yield metric.
Revenue per shipment increased 1.2% y/y during the quarter. Management said on a Thursday call with analysts that the 5.9% general rate increase implemented at the beginning of the year is seeing “strong capture rates.”
The unit recorded a 93.3% adjusted operating ratio (6.7% operating margin), 580 basis points worse y/y. The adjusted OR excluded $126 million in costs associated with the separation. Lower volumes and a 410-bp increase in salaries, wages and benefits expenses (as a percentage of revenue) were the culprits. FedEx Freight has largely completed the staffing process for a dedicated LTL sales team.
(The unit also incurred other separation-related costs that were not excluded from the adjusted operating result.)
Management’s revised outlook calls for FedEx Freight’s revenue to decline by a low-single-digit percentage y/y in fiscal 2026 (ending May 31). Revenue is expected to be flat to down slightly y/y in the fiscal fourth quarter as yield growth offsets a mid-single-digit decline in shipments.
Full-year adjusted operating income is now expected to decline $400 million y/y versus the prior forecast calling for a $300 million decline.
FedEx Corp. raises guidance
FedEx Corp. (NYSE: FDX) reported consolidated revenue of $24 billion in the quarter, an 8% y/y increase and better than the consensus estimate of $23.48 billion. Adjusted earnings per share of $5.25 were well ahead of the $4.13 consensus estimate and the $4.51 reported in the year-ago period. The adjusted EPS number excluded 84 cents in spinoff and optimization costs.
The company again raised guidance for consolidated operations in fiscal 2026.
It now expects full-year consolidated revenue to increase by 6% to 6.5% y/y (prior outlook called for a 5% to 6% increase) and adjusted EPS to range from $19.30 to $20.10 ($17.80 to $19 previously). Consensus EPS was $18.66 at the time of the print.
Shares of FDX were up 9.3% in after-hours trading on Thursday.
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