The nation’s largest less-than-truckload carrier, FedEx Freight, said Thursday that volumes have continued to stabilize and that it expects to see stronger operating leverage next year as a standalone company. Its local, dedicated LTL sales teams are seeing business wins and driving a better freight mix across the network.
FedEx Freight (NYSE: FDXF) completed its spinoff from FedEx (NYSE: FDX) in June. FedEx reported financial results on Wednesday.
The carrier reported four-month results (June through September) Thursday after the market closed as part of a transition to calendar-year financial reporting.
Revenue in the period increased 9% year over year to $3.28 billion. Revenue per day was up 8%. Adjusted earnings per share of $2.15 were 70 cents lower y/y.
The revenue increase was driven by a 9% increase in revenue per hundredweight (yield), while tonnage was level with the prior-year period. The tonnage result stemmed from a 1% decline in shipments per day, which was offset by a 1% increase in weight per shipment.
Yield (ex-fuel) was up just 0.3% y/y. Revenue per shipment (ex-fuel) increased 2%.
It has repriced approximately 25% of its contract business since the separation and said net revenue churn has improved. It expects both volumes and yield (ex-fuel) to increase in the fourth quarter. September marked the ninth straight month of expansion for the U.S. manufacturing complex, which is a significant source of LTL freight.
FedEx Freight’s 2027 general rate increase is expected to average 6.9% and takes effect on Jan. 8.
The company reported an 84.5% adjusted operating ratio (inverse of operating margin), which was 90 basis points better y/y.
Guidance for the fourth quarter includes revenue of $2.3 billion to $2.37 billion, a 13% y/y increase at the midpoint of the range. Higher diesel fuel surcharges will be a primary driver of the increase. Diesel prices were 48% higher y/y in the third quarter.
Adjusted operating income is expected to increase 20% y/y (at the midpoint) to a range of $185 million to $205 million. (The guide implies a 91.4% to 92% adjusted OR, 50 bps better y/y at the midpoint.)
The company said it will soon decide on a dividend, and on buying back stock. It said that share repurchases would likely be executed to offset dilution as FedEx unwinds its equity position.
Shares of FDXF were up 3% in after-hours trading on Thursday.
Why it matters? FedEx Freight’s standalone results provide deeper context around its LTL operations and broader market trends.
