FedEx has announced plans to spin off its freight trucking division as a separate publicly-held entity. The move aims to focus the company on its core delivery business and unlock up to $20 billion in shareholder value. Analysts believe this will create an opportunity for FedEx to expand and improve its operations.
The spinoff is seen as a strategic move, with analysts noting that FedEx Freight assets were not fully appreciated within the company. The division’s revenue fell 11% to $2.17 billion during the fiscal second quarter, but executives attribute this to a loss of cost-conscious customers and the business appearing to have bottomed out.
Despite this, FedEx shares jumped 8% in after-hours trading, adding $5 billion to the company’s market capitalization. Analysts see this as a positive sign, with Faisal Hersi from Edward Jones saying that making FedEx Freight an independent company will create value for investors.
The spinoff is also expected to help FedEx merge its separate Express and Ground units to boost profits. The company’s freight division is one of its most profitable businesses, and analysts believe that spinning it off as a publicly-held entity will provide an opportunity to expand and improve its operations.
FedEx Freight is the largest U.S. provider of less-than-truckload services, which involve carrying multiple shipments from different customers on a single truck. The unit’s revenue fell during the fiscal second quarter due to continued weakness in the U.S. industrial segment, but executives attribute this to cost-cutting measures and efforts to improve efficiency.
The move comes as FedEx faces challenges in its core delivery business, with demand for fast and lucrative deliveries remaining weak. The company has lowered its profit outlook for the full year ending May 2025, calling for adjusted profit of $19 to $20 per share.
Overall, FedEx’s plan to spin off its freight trucking division is seen as a strategic move aimed at unlocking shareholder value and improving operational efficiency.
Source: https://www.reuters.com/business/fedex-spin-off-its-less-than-truckload-freight-business-2024-12-19