FedEx Freight outlook lowered for fiscal year 2026
FedEx Corp. lowered expectations for its less-than-truckload unit, FedEx Freight, Thursday after the market closed. A planned spin off of the LTL business, into a separate publicly traded company, is now scheduled for June 1.
During FedEx Freight’s fiscal second quarter ended Nov. 30, revenue fell 1.7% year over year to $2.14 billion. A 2.8% decline in tonnage was partially offset by a 1.1% increase in revenue per hundredweight, or yield.
Shipments were down 3.9% y/y and 2.9% lower than the quarter ended Aug. 31. Weight per shipment was up 1.2% y/y. (The increase in shipment weight was a modest headwind to the yield metric.)
Manufacturing data for November showed the industrial complex has been in a slump for 35 of the past 37 months. The Purchasing Managers’ Index registered a 48.2 reading in the latest month, 50 basis points worse than October. (A reading above 50 signals expansion while one below 50 indicates contraction.) The new orders index — an indicator of future activity — fell 200 bps to 47.4.
The LTL unit reported an adjusted operating ratio (inverse of operating margin) of 88.7%, which was 300 bps worse y/y. The adjusted OR excluded $152 million in one-time costs associated with the spinoff.
Top-line weakness and a 110-bp y/y increase in salaries, wages and benefits expenses (as a percentage of revenue) were the primary headwinds. FedEx Freight has completed over 85% of the hiring for what will become a 400-person LTL sales team. Hiring and other costs were a $25-million (120-bp) headwind in the period.
Revenue at FedEx Freight is now expected to decline slightly y/y in the fiscal year ending May 31. (The company was previously calling for a low-single-digit y/y increase in revenue.) Daily shipments are forecast to decline by a low-single-digit percentage, which should be partially offset by a modest increase in yields. Lower volumes are expected to continue to be a drag on margins. (Operating income is now expected to decline $300 million y/y versus the prior forecast for a $100 million increase.)
FedEx Freight’s previously announced general rate increase of 5.9% (on average) will take effect on Jan. 5.
FedEx Corp. raises guidance
FedEx (NYSE: FDX) reported consolidated adjusted earnings per share of $4.82 for its fiscal second quarter. The result was 71 cents higher than the consensus estimate and 77 cents higher y/y. Revenue of $23.5 billion was $700 million ahead of expectations.
The company raised guidance for its consolidated operations in fiscal year 2026.
It now expects consolidated revenue to increase by 5% to 6% y/y (prior outlook called for a 4% to 6% increase) and full-year adjusted EPS to range from $17.80 to $19 ($17.20 to $19 previously). The adjusted EPS number excludes several items, including retirement plan accounting adjustments, costs associated with the spinoff, and business optimization costs, among others.
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