On December 19, the corporation announced the FedEx Freight separation, making it a separate company that will be North America’s largest publicly traded less-than-truckload carrier. The FedEx Corporation said during the announcement that the decision was made considering the assessment of a board of directors.
The corporation “decided to pursue a full separation of FedEx Freight through the capital markets, creating a new publicly traded company,” seeking the role of FedEx Freight in its broader portfolio. Fed Ex also said that the creation of two companies, FedEx and FedEx Freight would conserve and promote “operational synergies between both companies,” and enable “greater strategic, operational and financial execution for each company and its stakeholders.”
FedEx Plans to Separate Freight Business
FedEx Freight, with $9.4 billion in revenue for fiscal 2024, has grown its operating profit by nearly 25% annually over the past five years while expanding its operating margin by about 1,100 basis points. The company is expected to benefit from a strong balance sheet, helping it maintain and strengthen its leadership in the less-than-truckload (LTL) market.
FedEx announced that its planned separation will create two independent, publicly traded companies. The move is designed to be tax-free for federal income tax purposes. The FedEx Freight separation will take place within 18 months.
FedEx Q2 Earnings Soar
On Thursday, FedEx Corp. announced its Q2 earnings report which exceeded the expectations of Wall Street analysts. The company announced that its second-quarter EPS jumped 1.5% to $4.05 while sales revenue dipped 1% totaling $22 billion. The analysts predicted a consensus earning of $4.01 a share and sales revenue of $22.14 billion.
Raj Subramaniam, chief executive officer of FedEx Corp. said, “Our second quarter results demonstrate that our efforts to transform our operations are working. The Federal Express segment delivered operating profit growth despite several headwinds, including the continued weak U.S. domestic demand environment as well as the expiration of our U.S. Postal Service contract.”
The corporation also revised the earnings forecast for fiscal 2025, projecting flat revenue growth, as compared to the previous forecast of single-digit growth. The company now expects adjusted earnings per share to range between $19.00 and $20.00, slightly down from the previous forecast of $20.00 to $21.00 per share.
FedEx Stock Performance
After the stock market closed on December 19, FedEx stock surged by 10%. FedEx stock rose by about 1% to $275.84 during regular trading, but it’s down roughly 9% for December. The sharp drop in stock price on September 20 followed disappointing fiscal Q1 earnings, where cost-cutting efforts failed to offset declines in profitable priority services. Additionally, FedEx reduced its full-year earnings forecast.
