FedEx’s freight division spinoff should unlock more shareholder value

FedEx’s shares are down from their pandemic-era high of $320 in 2021; that fall reflects the re-opening of stores, which hurt online shopping volumes at the same time FedEx faced rising fuel and other costs. More recently, the threat of U.S. tariffs on imports, particularly on duty free “de minimis” shipments worth less than $800, has also weighed on the stock.

In response, the company has launched big restructuring plan to better align its costs with revenue. It also plans to spin off its trucking business in 2026, which should boost shareholder value.

Lower costs and investments in new equipment should lead to a profit rebound over the next few years. Higher earnings will also let FedEx continue to reward investors with rising dividends and share buybacks.

FEDEX CORP. (New York symbol FDX, www.fedex.com) took its current form in 1973 as Federal Express. At that time, operating out of Memphis, Tennessee, it delivered packages and documents to 25 U.S. cities. Today, the company provides courier services throughout the U.S.

as well 220 other countries.

FedEx has two main businesses: FedEx Express (including air freight and ground delivery), supplying 89% of its revenue and 77% of its earnings in fiscal 2025; and FedEx Freight, which ships a variety of products by truck (11%, 23%).

Due to a surge in online shopping during the COVID-19 pandemic, the company’s overall revenue rose 11.4%, from $83.96 billion in 2021 to $93.51 billion in 2022 (fiscal years end May 31).

In 2023, revenue fell 3.6% to $90.16 billion, and by another 2.7% to $87.69 billion in 2024. That’s largely due to customers shifting away from overnight air services to the less-expensive ground delivery. However, revenue rebounded by 0.3% to $87.93 billion in 2025.

Thanks to higher revenue, FedEx’s earnings before unusual items rose 12.6%, from $4.89 billion in 2021 to $5.50 billion in 2022. Due to fewer shares outstanding, per-share earnings gained 13.4%, from $18.17 to $20.61.

However, earnings declined 27.4% to $14.96 a share (or a total of $3.84 billion) in 2023 as a result of rising costs, particularly fuel. Thanks to savings from a restructuring plan (more on that below), earnings in 2024 rose 16.7% to $17.80 a share (or $4.48 billion). Overall earnings then dipped 1.1% in 2025, to $4.43 billion, while per-share earnings improved 2.2% to $18.19.

To better align the company’s air and ground fleets with package volumes, FedEx launched a new restructuring plan in 2023 it calls DRIVE. Under that plan, the company permanently retired older planes, consolidated facilities, reduced routes and cut jobs.

The company has now completed the plan, which has cut $4.0 billion from its annual costs (including savings of $2.2 billion in fiscal 2025).

Those savings let FedEx return $4.3 billion to investors in fiscal 2025. That included share buybacks of $3.0 billion, or about 4.5% of the shares outstanding, which added $0.44 a share to its fiscal 2025 earnings per share. The company still has $2.1 billion remaining under its current repurchase authorization.

Growth Stocks: Planned spinoff should boost shareholder value

To further improve shareholder value, the company plans to spin off its FedEx Freight division as a separate company. This business is a leading provider of less-than-truckload (LTL) services, which combines freight from multiple customers into a single vehicle.

Investors will only be liable for capital gains taxes when they sell their new shares. The company expects to complete the transaction in mid-2026.

This new firm will have over 30,000 vehicles that handle an average of 92,000 shipments a day. About 66% of its annual revenue of $9.4 billion comes from priority shipments (items that must be delivered quickly) and 34% from slower, lower-priced shipments. The new spinoff firm could also become an attractive takeover target.

For fiscal 2026, FedEx expects its DRIVE and related restructuring plans will save $1 billion. That should help lift its earnings by about 7% to $19.48 a share. The stock trades at a low 12.4 times that estimate. The shares yield 2.4%.

Recommendation in Wall Street Stock Forecaster: FedEx Corp. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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