FedEx Beats Earnings, Sets June 1 Date for $30B+ Freight Spin-Off
December 19, 2025 · by Fintool Agent
Fedex-0.76% delivered a strong fiscal second quarter Thursday, beating expectations on both earnings and revenue while confirming that the spin-off of its trucking business is on track for June 1, 2026. The logistics giant's adjusted EPS of $4.82 came in 19% higher than a year ago, and management raised full-year guidance—a vote of confidence in its sweeping transformation strategy.
But the bigger story is what happens six months from now: FedEx Freight will become an independent, publicly traded company under ticker symbol FDXF on the New York Stock Exchange. It will be one of the largest pure-play less-than-truckload (LTL) carriers in the United States, and analysts estimate it could be valued between $30 billion and $35 billion.
"FedEx delivered an outstanding second quarter as we successfully executed our growth strategy and advanced our network transformation, while navigating a highly challenging external environment," said CEO Raj Subramaniam. "I am extremely proud of our team members worldwide for their commitment to make every FedEx experience outstanding this Peak season."
The Numbers: Earnings Beat Despite Headwinds
FedEx's Q2 FY2026 results surpassed Wall Street expectations, which had been looking for $4.07 per share on revenue of $22.88 billion:
| Metric | Q2 FY2026 | Q2 FY2025 | Change |
|---|---|---|---|
| Revenue | $23.5B | $22.0B | +6.8% |
| Operating Income (GAAP) | $1.38B | $1.05B | +31% |
| Operating Margin (Adjusted) | 6.9% | 6.3% | +60 bps |
| Net Income | $956M | $741M | +29% |
| Diluted EPS (GAAP) | $4.04 | $3.03 | +33% |
| Adjusted EPS | $4.82 | $4.05 | +19% |
The company is raising its full-year outlook, now expecting revenue growth of 5-6% (up from 4-6%) and adjusted EPS of $17.80-$19.00 (up from $17.20-$19.00).
"Our strong second quarter results and revised full-year outlook reflect the momentum that is building in our business as we continue to drive stockholder value within a challenging operating environment," said CFO John Dietrich.
FedEx Freight Spin-Off: Creating an LTL Giant
The headline event is the separation of FedEx Freight, which will create one of the nation's largest independent LTL trucking companies. The spin-off, first announced in December 2024, is now confirmed for June 1, 2026.
Leadership Team Named
John A. Smith, currently FedEx's Chief Operating Officer for U.S. and Canada operations, will serve as President and CEO of the independent FedEx Freight. Smith previously led FedEx Freight as CEO from 2018 to 2021, where he "successfully grew the company's revenue and operating income while safely navigating the team through the challenging dynamics associated with the pandemic."
R. Brad Martin, Vice Chairman of FedEx Corp's Board of Directors who led the strategic analysis that resulted in the separation decision, will serve as Chairman of the new FedEx Freight board.
Key Dates and Milestones
| Date | Milestone |
|---|---|
| December 2024 | Board approves FedEx Freight separation |
| May 2025 | Leadership announced - Smith as CEO, Martin as Chairman |
| September 2025 | Confidential Form 10 filed with SEC; IRS ruling requested |
| December 2025 | Q2 results confirm June 1 date; $248M in YTD spin-off costs |
| April 8, 2026 | FedEx Freight Investor Day in New York City |
| June 1, 2026 | Spin-off complete; FDXF begins trading on NYSE |
The transaction is expected to be tax-free for U.S. federal income tax purposes for FedEx stockholders, with shares of the new company distributed to existing FDX shareholders.
Why Spin Off Now? The Strategic Rationale
Analysts have long argued that FedEx Freight is undervalued within the conglomerate structure. The LTL business has different growth dynamics, capital requirements, and operating characteristics than the express package business—and investors increasingly want pure-play exposure to each.
FedEx Freight is the largest LTL carrier in the United States by revenue, competing with Old Dominion Freight Line-1.58%, Xpo-1.29%, and Saia-1.75%. As an independent company, it can pursue its own strategic priorities, make targeted capital investments, and attract investors specifically interested in the LTL freight market.
FedEx Freight Q2 Performance
The freight segment's Q2 results showed mixed signals heading into independence:
| Metric | Q2 FY2026 | Q2 FY2025 | Change |
|---|---|---|---|
| Revenue | $2.14B | $2.18B | -1.7% |
| Operating Income (GAAP) | $90M | — | — |
| Operating Income (Adjusted) | $242M | $311M | -22% |
| Operating Margin (Adjusted) | 11.3% | 14.3% | -300 bps |
| Daily Shipments | -3.9% YoY | — | — |
Operating results declined due to lower shipments, higher wage rates, and costs associated with hiring dedicated LTL sales professionals in preparation for the spin-off. The segment incurred $152 million in one-time spin-off costs during the quarter.
However, the company noted that yield (revenue per hundredweight) improved, partially offsetting volume weakness tied to ongoing softness in the industrial economy. Manufacturing PMI data has shown contraction for 35 of the past 37 months.
Network 2.0 and DRIVE: The Transformation Story
Beyond the spin-off, FedEx continues executing its multi-year transformation:
Network 2.0: FedEx has implemented optimization in approximately 355 locations in the U.S. and Canada as of November 30, 2025. The program consolidates sortation facilities, reduces pickup-and-delivery routes, and optimizes linehaul operations. Canada implementation is complete; U.S. implementation is expected by the end of calendar 2027.
DRIVE Program: The company is targeting $1 billion in permanent structural cost reductions for fiscal 2026 through its transformation initiatives.
Europe Workforce Reduction: A plan to reduce approximately 1,400 employees across back-office and commercial functions is expected to generate $150 million in annualized savings beginning in calendar 2026.
The MD-11 Headwind: Peak Season Disruption
One challenge for the current quarter: FedEx's fleet of MD-11 cargo aircraft remains grounded following a Ups-0.45% crash in November that prompted FAA inspections. CFO John Dietrich disclosed that the grounding could cost FedEx up to $175 million in peak-season expenses.
The company incurred $25 million in MD-11-related costs in November, with approximately $150 million expected in December as FedEx sources alternative transportation capacity during the busiest shipping period of the year. The fleet is expected to return to service in FedEx's fiscal fourth quarter (ending May 2026).
What to Watch
April 8, 2026: FedEx Freight Investor Day will provide detailed financial targets, capital allocation plans, and growth strategy for the independent company. This will be the first comprehensive look at FDXF's standalone investment case.
June 1, 2026: Spin-off execution date. FedEx shareholders will receive shares of the new company in a tax-free distribution.
Q3 Earnings: Management warned that Q3 results will be pressured by MD-11 costs, spin-off expenses, and ongoing freight market softness. The real test for FedEx Freight begins when it reports as an independent company.
For investors, the spin-off creates a decision point: continue holding both FDX and FDXF, or concentrate on one business model. FedEx Corp will become a more focused express/parcel company competing with Ups-0.45%, while FedEx Freight will trade as a pure-play LTL carrier valued against Old Dominion-1.58%, Xpo-1.29%, and Saia-1.75%.
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