In its recent Q4 earnings call, FedEx CEO Raj Subramaniam noted that, while demand is still down, "because of our strong fourth quarter performance, freight ended fiscal year 2024 with full year operating margin equal to last year's all-time high." But the carrier isn't satisfied with keeping the status quo. Today, we'll talk about FedEx's plan for its Freight business and what that means for you.

FedEx Freight under review

FedEx Freight is a major player in the LTL market, boasting the highest revenue among all LTL carriers. However, in its Q4 call, CEO Raj Subramaniam hinted at a potential sale or spinoff, stating the company is "conducting an assessment of the role of FedEx Freight in our portfolio structure and potential steps to further unlock sustainable shareholder value."

According to its website, FedEx Freight owns more than 25,000 trucks, employs over 46,000 people, and operates approximately 400 service centers. The review of FedEx's Freight division, which handles less-than-truckload (LTL) shipping, could have significant implications for the LTL industry, especially if FedEx decides to sell the business.

Why now?

This move comes as FedEx seeks to streamline operations and boost shareholder value. Subramaniam says it is "firmly on track to achieve our target of $4 billion of savings in FY 2025 compared to the FY 2023 baseline." The carrier is already merging its Ground and Express units and aims to achieve significant cost savings through its DRIVE initiatives. Selling Freight could free up capital and allow FedEx to focus on its core parcel business.

Does this sound familiar? UPS just announced the sale of Coyote, its third-party logistics (3PL) provider, at an $800 million loss so that it can focus on its core business.

What if FedEx sells?

If FedEx decides to part ways with Freight, it would be a major shakeup in the LTL landscape. This sale could open up new opportunities for growth and innovation, with potential buyers including private equity firms or even rival LTL carriers.

For now, though, Subramaniam says, "we'll do this analysis thoroughly, deliberately, and when we have something to communicate on this, we'll, of course, do so."

So what can you do now?

FedEx is working to cut costs and increase revenue, making now an ideal time to renegotiate your FedEx contract and lock in the lowest possible rate. It's a win-win for everyone.

FedEx secures long-term business, contributing to its goal of increased revenue. And you benefit from cost-savings prompted by a low-demand market.

The team at ShipRx has more than three decades of experience in the shipping industry— working first for the carriers, and now for businesses like yours. Get in touch today for a free, no-pressure contract evaluation. Our clients frequently see 20-30% savings, so get in touch today and start seeing savings before the end of summer.