By Lisa Baertlein and Nandan Mandayam April 8 (Reuters) – FedEx Freight, the trucking company separating from the overnight delivery firm this summer, is expected to report an operating margin of 12% this year, incoming CEO John Smith told investors on Wednesday. That is based on expected revenue of $8.7 billion and adjusted operating income […]
Business
FedEx trucking spinoff targets 2026 operating margin of 12%
Audio By Carbonatix
By Lisa Baertlein and Nandan Mandayam
April 8 (Reuters) – FedEx Freight, the trucking company separating from the overnight delivery firm this summer, is expected to report an operating margin of 12% this year, incoming CEO John Smith told investors on Wednesday.
That is based on expected revenue of $8.7 billion and adjusted operating income of $1.1 billion, Smith said at the first investor day for the trucking company scheduled to be spun out of FedEx into an independent, publicly listed company on June 1.
FedEx Freight, the largest provider of less-than-truckload (LTL) services in the United States, sees average revenue growing in the range of 4% to 6% in the medium term, Chief Financial Officer Marshall Witt said.
The company also expects average core profit growth in the range of 10% to 12% over the medium term, Witt added.
FedEx Freight competes with the likes of XPO, Saia and Old Dominion Freight Line.
Investments in modernizing and separating the business from FedEx will dampen profit in the short term, but cost controls, automation and focusing on adding more high-profit cargo will help strengthen margins over time, Witt said.
Technology improvements include automating freight booking, customer invoicing and dynamic pricing, executives said.
They added that FedEx’s Custom Critical business specializing in high-margin temperature-controlled shipments of pricey goods like pharmaceuticals will continue to be part of FedEx Freight. UPS and other niche transport companies also compete for those shipments.
FedEx Freight’s forecasts come as near-record-high U.S. diesel prices delay a long-awaited trucking industry turnaround and squeeze cash flow and profits for independent big-rig drivers.
Analysts have said they believe FedEx Freight’s assets were not fully appreciated within FedEx and that being a separate public entity would help it expand in the LTL trucking market that involves carrying multiple shipments from different customers on a single truck.
(Reporting by Lisa Baertlein in Los Angeles and Nandan Mandayam in Bengaluru; Editing by David Holmes, Kirsten Donovan)