PYMNTS MonitorEdge May 2024

Experts Expect Spinoff as FedEx Considers Future of Freight Unit

FedEx is reportedly expected to spin off its Freight unit after it conducts an assessment of the future of that business unit.

The company’s Freight unit, which is the largest operator in the less-than-truckload (LTL) sector, could bring a windfall to FedEx shareholders if it were spun off as a separate publicly traded company, The Wall Street Journal (WSJ) reported Wednesday (June 26).

LTL is a “darling on Wall Street right now” and a spinoff of FedEx Freight could have “a market capitalization of $50 billion by itself,” Satish Jindel, president of SJ Consulting Group, said in the report.

The dominance of FedEx Freight in the LTL sector means a sale of the business is “less likely,” Daniel Imbro of Stephens wrote in a research note, per the report.

This report comes a day after FedEx said in an earnings release that it is considering the future of FedEx Freight as part of its planning for long-term stockholder value-creation.

“As part of this work, FedEx management and board of directors are conducting an assessment of the role of FedEx Freight in the company’s portfolio structure and potential steps to further unlock sustainable shareholder value,” the company said in the Tuesday (June 25) earnings release. “The company is committed to completing this review thoroughly and deliberately, by the end of the calendar year.”

The company has already made other changes to its structure. During the most recent quarter, it completed its transition to “One FedEx,” consolidating FedEx Express, FedEx Ground and FedEx Services into Federal Express Corp. as of June 1.

FedEx said in a presentation released Tuesday that this new operating structure will reduce costs and “allow teams to move with speed.”

This consolidation of the company’s pickup and delivery, sorting and other parcel services may leave the trucking business “on the outside,” the WSJ report said.

FedEx competitor UPS sold its trucking business in 2021 and sold its freight brokerage business this month, according to the report.

As of Wednesday, the second-largest LTL carrier by revenue, Old Dominion Freight Line, had a market cap of $38.7 billion, while the third-largest competitor, XPO, had a market cap of $12.2 billion, per the report.