Transcript: FedEx Freight Hldg Co Q4 2026 Earnings Conference Call

On Thursday, FedEx Freight Hldg Co (NYSE: FDXF ) discussed fourth-quarter financial results during its earnings call. The full transcript is provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

Access the full call at Summary FedEx Freight Hldg Co successfully launched as a standalone company, completing a seamless transition thanks to rigorous planning and collaboration. 4 billion in revenue, $363 million in adjusted operating income, and a 15% adjusted operating margin, despite softer year-over-year volume. Strategic initiatives include a focus on LTL, improving operational efficiency, enhancing customer engagement through technology, and leveraging AI for future efficiencies. FedEx Freight is encouraged by improving market trends, such as stabilizing demand and sequential volume improvements, and expects 4-6% revenue growth during the transition period.

The company completed its technology separation from FedEx Corp, launched a new digital presence, and implemented a new freight pricing system, enhancing operational capabilities. Management emphasized the dual-service model as a competitive advantage, focusing on both Priority and Economy offerings to optimize capacity and maintain service integrity. The company plans to reduce transition service agreement costs, modernize legacy systems, and maintain a focus on high-quality, profitable growth.

FedEx Freight anticipates $605 million to $645 million in adjusted operating income for the transition period, with yield and operational efficiencies expected to drive margin improvements. Full Transcript OPERATOR Good day and welcome to the FedEx Freight Hldg Co fourth quarter fiscal 2026 conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

I would now like to turn the conference over to Marianna Rose, Head of Investor Relations. Please go ahead. Marianna Rose, Managing Director, Investor Relations Good afternoon and welcome to FedEx Freight Hldg Co's fourth quarter earnings conference call. com, and this call is also being streamed from our website.

Joining us today are John Smith, President and Chief Executive Officer at FedEx Freight Hldg Co, and Marshall Witt, our Executive Vice President and Chief Financial Officer. Following prepared remarks, John and Marshall will both be available to answer questions. To allow time for as many participants as possible, we ask that you limit yourself to one question. Afterward, you are welcome to re-enter the queue if you have additional questions during the call.

Certain statements may be considered forward-looking as defined in the Private Securities Litigation Reform Act of 1995 and are subject to factors that could cause actual results to differ materially from those expressed or implied. For additional information, as well as reconciliations of the non-GAAP measures discussed today to the most directly comparable GAAP measures, please visit our website and refer to our press releases and SEC filings. With that, I'd like to turn the call over to John for opening remarks.

John Smith, President and Chief Executive Officer Well, thanks, Mary, and good afternoon, everyone, and welcome to FedEx Freight Hldg Co's first ever earnings conference call as a standalone company. This is an important and highly anticipated milestone for our entire organization. In April, we introduced the new FedEx Freight, and on June 1st we proudly rang the opening bell at the New York Stock Exchange, officially marking our debut as a standalone, publicly traded company under the ticker FDXF. I want to share my sincerest appreciation to our incredible team members who have worked so hard to bring us to this moment.

It's their steadfast dedication and commitment that make FedEx Freight the company it is today. I also want to thank the broader FedEx team who supported us throughout our journey to become independent. Our FedEx roots created a firm foundation, one built on operational excellence, a customer-focused mindset, and an unwavering focus on reliability, quality, and efficiency. As I look ahead, I have great confidence in our ability to build on this strong foundation through our go-forward strategy and a team with a proven track record of execution.

Our future success is anchored in a clear, disciplined approach centered on key stakeholders: our people, our customers, and our shareholders. As we enter this next chapter, we are shaping a new legacy, sharpening our focus on LTL, and positioning FedEx Freight for a more agile, resilient, and profitable future. As you've heard me say before, we are just getting started. Let's begin with a few highlights from the quarter.

As I mentioned, we successfully launched as a standalone LTL carrier, marking a defining moment for FedEx Freight and positioning us to set a new standard in the LTL industry. And let me be clear: the successful launch did not happen by chance. It was the direct result of months of rigorous planning, deep collaboration, and detailed coordination across our organization. Our team's discipline and unwavering focus enabled a seamless transition and ensured we were ready to continue to deliver for our customers from day one.

As we completed this successful launch, I am proud that safety remained our top priority without any type of compromise. Our employees continue to live our safety-above-all culture, delivering record-low DOT-preventable accident performance in fiscal year 2026. This result is a direct reflection of the collective responsibility, professionalism, and dedication of our team across North America. 4 billion in revenue, $363 million in adjusted operating income, and a 15% adjusted operating margin in the fourth quarter.

Driving further into our operational performance, as expected, volume was softer year over year; however, trends have improved sequentially. We're encouraged by these early signs that demand may be stabilizing for our services, supported by improving manufacturing indicators, truckload trends, and higher year-over-year contractual increases. 5% year over year in the fourth quarter, driven primarily by higher fuel prices and increased weight per shipment. This reflects improved backhaul efficiency enabled by tighter truckload capacity.

Importantly, we are encouraged by the strong execution of our world-class team. Operating with a renewed focus on high-quality, efficient, and profitable service without incremental costs, our team delivered meaningful improvements in pickup reliability, on-time delivery performance, as well as trailer utilization. We also achieved a record claims ratio for the quarter and remain on track to deliver our best-ever claims ratio for calendar year 2026. We look forward to sharing more details about our key operating metrics in October when we report our first full quarter of standalone operating and financial results.

Alongside our operations team, our dedicated sales force is ramping quickly and integrating seamlessly across the organization. Our sales force is now fully staffed, and the team is already making a meaningful and positive impact, working closely with both new and existing customers as well as our frontline employees. For the first time in years, our sales teams are back in our service centers, working side by side with operations to support customers where they are located.

This level of integration is driving more direct engagement in the field, with sales team members partnering closely with our drivers, even joining them on delivery routes and meeting customers face to face. The result is a stronger, more collaborative, customer-focused culture where accountability and accessibility are shared across the organization. Importantly, our separation has enabled us to build dedicated LTL expertise across our entire commercial organization.

We've already seen that investment take hold as our sales team deepen customer relationships, introduce fit-for-purpose LTL solutions, and accelerate adoption of our modernized, LTL-focused technology platforms. Also during the fourth quarter, we successfully executed our technology separation plan, enabling a tax-free spin from FedEx Corp. I am pleased to say that we have now transitioned to steady-state operations with a more stable IT environment. As a critical part of this transition, we launched new purpose-built capabilities designed specifically for the LTL market.

com in May, establishing our standalone digital presence, and we're already seeing strong customer adoption. Early engagement has exceeded expectations, with nearly half a million unique site visits and approximately 250,000 online shipments already scheduled since launch. Also in May, we launched our new freight pricing system, a purpose-built LTL platform on a more modern, flexible, and scalable technology stack. This is an important step in addressing pricing complexity that previously required significant manual intervention and time, while improving efficiency and positioning us to evolve our pricing capabilities more effectively over time.

While still early, we are beginning to see tangible progress. For example, we successfully onboarded one of our largest and most complex customer contracts—something our system did not support previously—which we view as a meaningful proof point of the platform's capabilities. We see this as a foundational investment, with additional enhancements and efficiency gains expected as we continue to build on the system in the upcoming months. From an infrastructure standpoint, we also completed a large-scale, high-quality transition.

More than 1,000 applications were successfully separated, including the core systems required to run this business, with minimal disruption to customers, operations, and revenue. Approximately 17,000 devices have been migrated into the freight environments, and we have achieved further stabilization of the end-user experience. We have shifted our IT operations from a separation phase to a transformation phase, with a strong focus on modernization, reliability, and continuous improvement. Now, looking ahead, our priorities are clear.

First, we are working to exit transition service agreements quickly to reduce cost and risk. Second, we will leverage AI responsibly across the entire organization to drive efficiencies and enhance the customer experience. And finally, we will continue to modernize legacy systems to simplify and streamline our technology stack. As I reflect on the quarter, I am incredibly proud of the progress we've made, reinforcing our strong, scalable model that positions FedEx Freight for long-term growth as a standalone company.

Now, at the core of this model is a single integrated network powering our dual-service offering—an important differentiator and a key driver of both efficiency and profitability. Nearly half of our customers use both Priority and Economy, underscoring the value of the flexibility we provide, enabling them to choose how they manage speed and cost. Our Priority service is approximately 40% faster than our nearest competitor based on published transit times. Priority shipments currently have shorter lengths of haul and more time-sensitive characteristics, supporting stronger yield and premium pricing.

Complementing that, our Economy offering provides a structurally lower-cost solution, utilizing longer average lengths of haul and low-cost rail to deliver attractive economics for more flexible shipments. Importantly, both services move through the same network using the same company assets, with separation only where it creates a clear economic or service advantage. That flexibility allows us to optimize capacity, drive density, manage lane imbalances, and maintain service integrity. And in practice, we can extend operating windows and utilize off-peak capacity, avoiding the need for incremental infrastructure while improving asset utilization and capital efficiency.

At the same time, flexible Economy routing enhances network resiliency, particularly during weather disruptions. From a commercial standpoint, our sales force sells both, delivering integrated solutions that are tailored to customer needs, and financially, our dual-service model is compelling. Today, both services generate healthy comparable margins, driven by premium pricing in Priority and structurally lower cost in Economy. As we continue to simplify the customer experience, speed and efficiency become clear differentiators, unlocking additional value in both our Priority and Economy offerings.

Bottom line, this is our advantage: one network, two services, and a structurally more efficient, resilient platform for growth and flexibility. Now I'll turn it over to Marshall, who will outline how our operational strength is translating into solid financial performance. He will also provide additional detail on our outlook for the remainder of the year. Marshall Witt, Chief Financial Officer Marshall, thank you John, and good afternoon, everyone.

We are very pleased with our performance in the quarter, especially given the complexity of executing the spin-off and navigating a dynamic external environment. Despite these moving parts, we enter this next phase from a position of strength with a durable financial profile. Turning to our fourth quarter results, revenue increased 5% year over year and, as John covered, the increase was driven primarily by higher fuel surcharges and, to a lesser extent, increased weight per shipment, partially offset by lower shipment volumes. Shifting to adjusted operating income, the benefit from higher revenue was partially offset by two key items.

First, as expected, we incurred approximately $80 million of separation-related costs associated with the planned spinoff. These costs were primarily tied to IT and system support, as well as incremental headcount required to support standalone operations. And second, we lapped a $33 million gain recorded in fiscal 2025 related to the sale of a facility, which is in line with our ongoing focus on network optimization. As a reminder, these results are presented on a segment basis as this represents our final quarter as part of FedEx.

Looking ahead, by mid-August, we expect to file our fiscal 2026 carve-out Form 10-K for the year ended May 31, along with recast historical financial statements for calendar years 2024 and 2025. Now, looking ahead to the remainder of the calendar year, we expect continued strong financial results through the transition period, which we define as June 1 through December 31, 2026. On a standalone basis, and to ensure we are comparing apples to apples, prior-year figures reflect carve-out results with costs previously allocated from FedEx Corporation reclassified into their respective expense line items.

Relative to the comparable seven-month period in 2025, on a standalone basis, we expect revenue growth in the range of 4% to 6%, modestly above the expectations we provided at Investor Day. Due in part to the dynamic fuel environment, approximately 60% of that growth is expected to be weighted towards the four months ending September 30. While volumes are expected to remain slightly below prior-year levels, we are seeing sequential improvement month to month.

The majority of anticipated revenue growth is expected to come from yield, supported by sustained higher fuel prices relative to results from earlier in the year, stronger pricing execution, and more focused sales efforts as a standalone company. 8% at the midpoint. Higher yield is expected to contribute approximately 200 basis points, driven largely by fuel and, to a lesser extent, early benefits from pricing improvements. In addition, we expect a modest tailwind of roughly 80 basis points as we continue to capture efficiencies and cost benefits across the network.

These gains are expected to be partially offset by several factors. First, we expect an additional approximate 130 basis point headwind related to performance-based compensation for our people. Second, we anticipate an approximately 120 basis point headwind from ongoing transition service agreements, which translates to approximately $65 million. These costs are consistent with the expectations we outlined at Investor Day, and we expect these agreements to remain in place through the remainder of the calendar year-end and into 2027 as we continue to invest in our fit-for-LTL technology platform and team.

And finally, we anticipate a modest volume-related headwind of approximately 30 basis points relative to prior year. We expect approximately 75% of adjusted operating income during the transition period to be weighted towards the four months ending September 30. This reflects typical seasonality, the number of business days and holidays in the back half of the year, and the timing of merit increases. With our current momentum and clear vision for the transition period, we remain confident in our path towards achieving medium-term targets outlined at Investor Day.