FedEx prepping LTL unit ahead of spinoff

Todd Maiden

Fri, Mar 21, 2025, 10:04 AM 5 min read

FedEx continues to pretty up the nation’s largest less-than-truckload business, FedEx Freight, ahead of a 2026 spinoff. However, a lackluster industrial complex continued to present a headwind during its recent fiscal quarter ended Feb. 28.

Revenue at FedEx Freight declined 5.3% year over year to $2.09 billion as tonnage fell 7.6% and revenue per hundredweight, or yield, increased just 2.2%. The tonnage decline was the combination of a 4.7% decline in shipments and a 3.1% decline in weight per shipment. A weak industrial economy along with lower fuel surcharge revenues were cited as the culprits.

Approximately 90% of the LTL unit’s top line comes from business-to-business transactions. Uncertainty around a rapidly changing trade landscape is weighing on capital investment and domestic manufacturing, which only recently punched through a two-year-plus downturn.

The Thursday update from FedEx (NYSE: FDX) showed trends in line with recent updates from other LTL carriers, which have reported mid- to high-single-digit tonnage declines to start the year. Saia (NASDAQ: SAIA) and ArcBest (NASDAQ: ARCB) are outliers to the trend given the idiosyncratic strategies they have in place: The former aggressively added terminals and freight following Yellow Corp.’s (OTC: YELLQ) 2023 collapse, and the latter is backfilling its network with truckload freight to offset LTL volume declines.

The LTLs have been the worst-performing group among transports since the beginning of the year. A 20%-plus sell-off in shares is tied to the tariff overhang and the possibility that Amazon (NASDAQ: AMZN) becomes a more meaningful player in the space. Valuation multiples are also resetting, giving back some of the froth captured during the pandemic, when the space was rewarded for its industrial-focused, final-mile-type networks that played an important part in restocking inventories. The group also remained in favor due to advantageous pricing dynamics.

FedEx Freight’s fiscal second quarter (ended Nov. 30) may be the nadir for the y/y declines. (Tonnage was down 11.3% y/y in that period.) Management is hoping for a return in B2B volumes at some point but still expects sequential top-line improvement in the current quarter (fiscal fourth quarter ended May 31), albeit still lower y/y, regardless.

“At freight, we expect a continued revenue decline on a year-over-year basis in Q4 but also expect the Q4 decline to moderate sequentially,” said Brie Carere, FedEx’s chief customer officer, on a conference call with analysts. The unit is focused on increasing density and weight per shipment, which should produce a better margin in the fiscal fourth quarter.