The nation’s largest less-than-truckload carrier, FedEx Freight, began trading Monday on the New York Stock Exchange under the ticker symbol FDXF. The spinoff from parent FedEx Corp. allows the carrier to approach the market with a narrowed commercial focus. The transaction is also expected to unlock shareholder value at both companies.
The transaction included a pro rata distribution of 80.1% of FedEx Freight’s (NYSE: FDXF) outstanding common stock to FedEx (NYSE: FDX) shareholders. Investors of record as of May 15 received one share of the new standalone company for every two shares of FedEx held. FedEx will keep a 19.9% stake in FedEx Freight, but plans to dispose of the holdings within two years through debt repayment or dividend distributions to shareholders.
FedEx Freight has replaced American Airlines (NASDAQ: AAL) in the Dow Jones Transportation Average (DJTA). The stock has also been included in the S&P 500. FedEx remains in the DJTA and the S&P 500.
Shares of FDXF were off 2.9% to $155.75 in early trading on Monday. Shares of FDX were up 0.8%.
“We move forward as an independent company with a sharpened focus and disciplined strategy to build on our competitive advantages and accelerate profitable growth,” said John Smith, FedEx Freight president and CEO, in a news release. “As the largest pure-play LTL carrier in North America, we will leverage our comprehensive network with more than 26,000 service center doors to deliver cost and service advantages to our customers and capitalize on growth opportunities in high-potential verticals.”
Financial targets outlined at April investor day
“Medium-term” financial expectations were provided at an April investor day in New York City.
The company forecast compound annual growth rates of 4% to 6% for revenue and 10% to 12% for adjusted operating income. The outlook implies high-20% incremental margins at the midpoints of the ranges, assuming 2026 fiscal year baselines of $8.7 billion in revenue and $1.1 billion in adjusted operating income. (The adjusted operating income forecast excludes $500 million in estimated spinoff costs.)
Revenue increases will be driven by higher yields and volumes, with an emphasis on yields. Combined with cost reductions, the improved revenue profile is expected to generate 300 basis points of adjusted operating margin improvement, pushing the company’s operating margin from roughly 12% currently to 15% over the near term. (The company flagged a 50-bp margin headwind from spinoff costs and fees associated with unwinding existing service agreements.)
