FedEx Spins Off Freight Unit, Resets Guidance
The logistics giant distributed 80.1% of FedEx Freight shares to stockholders in its latest quarter.
The logistics and delivery provider FedEx (FDX) completed the spin-off of its FedEx Freight division into a separate publicly traded company, marking a structural shift as it reset financial targets for the year. The move, finalized in the fiscal third quarter, distributed 80.1% of FedEx Freight shares to existing FedEx stockholders, leaving the parent company with a leaner portfolio focused on its core express and ground operations.
This quarter stood out for its strategic realignment, as FedEx recalibrated its outlook to reflect the absence of Freight’s revenue and earnings. The company said it would provide updated annual guidance following its fourth-quarter earnings call, noting that prior figures—including a $92 billion revenue base—had included the now-independent Freight segment. The spin-off followed a period of mixed performance, with FedEx’s express business gaining momentum even as Freight faced volume declines.
Revenue for the quarter reached $22.2 billion, up 2% from $21.7 billion a year earlier but unchanged from the prior quarter’s $22.0 billion. Adjusted earnings rose 17% year-over-year to $4.51 a share, accelerating from the 11% sequential gain in the second quarter. Operating margins expanded to 6.8%, a 60-basis-point improvement from the same period last year and a 50-basis-point increase from the prior quarter.
The Federal Express segment drove the quarter’s growth, with revenue climbing 3% to $19.18 billion and operating margins widening to 7.4%. U.S. domestic package volume rose 6% year-over-year to 14.8 million average daily shipments, while international export volume grew 8% to 1.14 million. Yields held steady at $15.69 per package, though they dipped slightly from the prior quarter. In contrast, FedEx Freight’s revenue fell 5% to $2.09 billion, with operating margins shrinking to 12.5% as average daily shipments declined 5%.
FedEx lowered its full-year guidance, now projecting adjusted earnings of $18.00 to $18.60 a share, down from the prior range of $19.00 to $20.00. Revenue is expected to be flat to slightly down for the year, a revision from the earlier outlook of approximately flat. The company completed $500 million in share repurchases during the quarter, bringing its fiscal-year total to $2.5 billion. Cash reserves declined to $5.1 billion from $5.6 billion in the prior quarter.
The spin-off of FedEx Freight removes a drag on margins but leaves FedEx more exposed to the cyclical express business. With the separation complete, the company’s focus shifts to executing its remaining operational priorities, including cost discipline and yield management in its core segments.