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FedEx Freight Eyes Market Share Gains as Stand-Alone Carrier
Investor Day Details Strategy for Small Business and Vertical Growth
Key Takeaways:
- FedEx Freight plans to grow share in small- to medium-size business grocery health care and data centers and energy LTL segments.
- The carrier expects fiscal 2026 revenue of $8.7 billion with a 12% operating margin and medium-term growth of 4% to 6%.
- FedEx Freight will pursue growth through sales expansion and operational initiatives including network dock and fleet optimization.
FedEx Freight plans to target improved market share among four segments of the less-than-truckload market as a stand-alone entity, according to top executives.
The FedEx Corp. division expects to increase its small- to medium-size business, grocery, health care, and data centers and energy market shares, Mike Lyons, chief specialized services and commercial officer, said during FedEx Freight’s first investor day April 8.
“We’re doing very little business in these verticals,” incoming President and CEO John Smith added.
The carrier has only small penetration in the $9 billion small- to medium-size business sector of the LTL market, said Lyons, with a significant percentage of its revenue coming from large corporate customers.
In addition, Lyons said: “Expanding our presence in the food and grocery space will not only be a growth driver, it will improve our weight per shipment and further enhance our overall profile mix.”
The transfer of FedEx’s Custom Critical operations to FedEx Freight around 18 months ago, meanwhile, is set to drive an increase in health care revenue, the company’s top executive noted.
FedEx Freight already ranks No. 1 on the Transport Topics list of the largest less-than-truckload carriers in North America.
Parent company FedEx Corp. ranks No. 2 on TT’s Top 100 list of the largest for-hire carriers in North America.
FedEx Freight entered the LTL space in 1998 with the acquisition of Viking Freight, expanded its regional network in 2001 with the purchase of American Freightways and added longhaul capability in 2006 by taking over Watkins Motor Lines.
Currently, the company has 365 locations, around 26,000 service center doors and about 30,000 vehicles, including 17,000 trailers.
“The footprint gives us the best locations, the best door capacity and the best transit times. What you see today is the result of years of investment in scale, service and operational discipline,” Smith told analysts.
Spinoff Set for June 1
Memphis, Tenn.-based FedEx Freight is set to be spun off from FedEx Corp. on June 1. FedEx Freight’s common stock is expected to be listed on the New York Stock Exchange under the ticker FDXF.
Smith told analysts gathered in New York at the initial investor day that FedEx Freight would have revenue of $8.7 billion and an operating margin of 12% in fiscal 2026, but the company expects compound annual revenue growth of 4%-6% in the medium term.
“We’re not hauling freight for practice. We’re here to make money and to grow profitably,” Smith quipped. “We have structural advantages that few can try to replicate. We have the biggest and most reliable network.”
Since 2023, the company has eliminated 39 service centers and around 1,000 terminal doors while adding nine locations and 600 doors in the densest freight locations, said Chief Operating Officer Clint McCoy.
The carrier has about 140,000 customers. Around 17% of the company’s revenue comes from its top 25 customers, and it has built a dedicated LTL sales force in excess of 500 employees in advance of the spinoff.
FedEx Freight’s business is split into 64% priority service, 32% economy service and the rest involves specialty services, said Lyons.
Three Operational Initiatives
Looking forward, said McCoy, FedEx Freight will undertake three operational initiatives to grow its business: linehaul network optimization, dock optimization and fleet modernization.
Linehaul network optimization will focus on improving flow volumes by deploying modeling capabilities, while dock optimization will see increased trailer utilization, reduced freight touches and more use of technology to raise shipper visibility.
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The last of those dock optimization initiatives focuses on shifting from weight-based planning to cube-based dimensional planning, said McCoy.
Alongside those initiatives, FedEx Freight expects to improve its customers’ experience, executives said, which in turn the carrier believes will see it rise in rankings resulting from surveys such as those carried out by Mastio & Co.
The carrier intends to improve its claims ratio, on-time service and pickup competency, said McCoy, although he declined to provide details on current levels when an analyst sought additional figures.
A sales force located around the U.S. will boost customer satisfaction too, said Smith, noting that new hires to the unit had been specifically placed across the country to aid the ability to solve problems.
“When you think about what FedEx Freight does and does well, when it focuses and concentrates on something, it generally will go out and will win,” said Lyons. “And so we feel confident about our strategy of using the new sales force that’s up and running, stepping into these markets that are high profitable and a high growth opportunity for us, and winning business, whether the market is where it sits today or is an upswing in the market.”
