By Lisa Baertlein and Abhinav Parmar
(Reuters) -FedEx on Thursday announced the long-awaited spinoff of its trucking division as it restructures its operations to focus on its core delivery business, sending shares in the package delivery giant up by as much as 10 in after-hours trading. % have increased. .
Analysts believe the spinoff could unlock up to $20 billion in shareholder value while clearing the way for FedEx management to focus on merging the operations of its separate Express and Ground units. They also say that FedEx Freight’s assets were not fully appreciated within FedEx and that spinning off that company as an independent company will provide an opportunity to expand and improve that business.
FedEx Freight is the largest U.S. provider of less-than-truckload services, which carry multiple shipments from different customers on a single truck; The shipments are then routed through a network of service centers, where they are transferred to other trucks with similar destinations. It generated sales of nearly $2.2 billion in the second quarter ended Nov. 30.
The rally in FedEx shares came despite a warning from the company that it expects sales to be held back in 2025 by a persistently challenging environment in which demand for the fastest and most lucrative deliveries remains weak.
Memphis-based FedEx lowered its earnings outlook for the full year ending May 2025, calling for adjusted earnings of $19 to $20 per share. In September, FedEx cut the top end of its full-year adjusted operating income to $20 per share from $20 to $22 per share.
FedEx’s second-quarter adjusted profit fell to $0.99 billion, or $4.05 per share, from $1.01 billion, or $3.99 per share, a year earlier. Still, the latest quarter’s results exceeded analysts’ average earnings expectations of $3.90 per share, LSEG said.
FedEx Freight posted lower-than-expected revenue and profit in the latest quarter, reflecting continued weakness in the U.S. industrial segment, which includes manufacturing, metals and chemicals. That was largely offset by continued cost savings at the company, which is cutting overhead costs and working to improve efficiency.
The Express division’s adjusted results improved during the quarter, helped by cost savings and increased international export volume, FedEx said. This was partially offset by higher payroll and leasing rates, weak demand for package delivery services in the US and the expiration of the US Postal Service contract for air transportation services on September 29, 2024.
FedEx previously warned that the loss of USPS, its largest customer, would create a $500 million headwind in the current fiscal year.