NEW YORK (AP) — FedEx Corp. announced plans Thursday to spin off its freight division, sending shares up 4% Friday morning despite a lowered annual profit forecast from the global shipping giant.
The move to separate FedEx Freight, the largest provider of less-than-truckload services in the United States, could unlock significant value for shareholders, with analysts estimating the unit’s worth between $30 billion and $35 billion.
“The decision to proceed with a full separation of the LTL segment has the potential to unlock significant value and is a welcomed holiday gift to FDX shareholders,” BMO Capital Markets analyst Fadi Chamoun said.
The spinoff, expected to complete within 18 months, comes as FedEx grapples with soft industrial shipping demand and the loss of a $500 million contract with the United States Postal Service, its largest customer.
FedEx Freight, which generated $9.4 billion in revenue in fiscal 2024, specializes in combining multiple shipments from different customers on single trucks. The company plans to add over 300 sales specialists before the separation.
“As part of FedEx, Freight is trading at 13 times forward estimates. If you look at some of the LTL peers, they trade north of 20 times,” said Edward Jones analyst Faisal Hersi, highlighting the potential for value creation.
The separation announcement follows months of cost-cutting measures and consolidation of FedEx’s express and ground operations. The company first disclosed in June it was considering options for the LTL business.
Analysts say the timing of the spinoff could benefit FedEx, allowing it to separate the business when freight demand conditions are favorable. The move is also expected to positively impact the broader LTL industry, which includes competitors like XPO Inc. and Old Dominion.
“We believe FXF’s investment in sales, service, and margin during the transition will be positive for the broader LTL industry,” said J.P. Morgan analyst Brian Ossenbeck.
FedEx shares have risen 9.1% this year, outperforming rival UPS’s 22% decline while still lagging behind the broader S&P 500 index.
The spinoff decision represents a strategic shift for FedEx as it focuses on addressing challenges in its core parcel delivery business amid changing customer preferences and market conditions.
