Truckload Market Tightness Drives FedEx Freight Revenue Growth in Standalone Quarter

FedEx Freight reported $2.41 billion in revenue for its fiscal fourth quarter ended May 31, a 4.8% increase over the $2.30 billion recorded in the same period last year. The Memphis, Tenn.-based less-than-truckload (LTL) carrier, now operating as a standalone entity following its spinoff from FedEx Corp. on June 1, attributed the revenue growth to truckload market tightness that boosted backhaul demand and heavier shipment weights. Despite a 5.9% drop in average daily shipments to 86,734 compared with 92,129 a year earlier, the company saw an 11.5% increase in revenue per shipment to $415.22, up from $372.55. Average shipment weight rose 3% to 948 pounds from 920 pounds in the prior-year period. The revenue growth was primarily driven by fuel surcharges and higher shipment weight, though partially offset by lower volume and a slight decline in base revenue per hundredweight. Capacity constraints in the truckload sector, exacerbated by federal enforcement on non-domiciled commercial driver licenses, driving school closures, and visa restrictions for overseas drivers, pushed more freight into the LTL market. FedEx Freight executives highlighted that some truckload volumes transitioned to LTL, particularly in backhaul lanes and larger shipments that would typically run as milk runs in truckload operations. The company now expects 4%-6% revenue growth through 2026, citing stabilizing demand and a more focused sales strategy targeting LTL customers and higher-margin verticals such as small- to medium-size businesses, grocery, healthcare, data centers, and energy. FedEx Freight also aims to improve penetration in the $9 billion small- to medium-size business LTL market, where it currently has minimal presence, and sees opportunities in food and beverage, a sector resilient to economic downturns. The company’s optimism is further supported by early signs of industry recovery, including improving manufacturing activity and truckload spot rates. Fuel surcharges played a significant role in revenue growth, with diesel prices rising from $3.809 per gallon before February 28 to a peak of $5.596 per gallon in mid-May before easing to $4.832 per gallon by June 22. FedEx Freight, trading under the FDXF ticker, emphasized its strategic shift to prioritize higher-margin segments and reduce reliance on large corporate customers.