FedEx’s transformation represents a fundamental shift from a capital-intensive, growth-focused model to a disciplined, margin-focused operation. The company has successfully achieved its $4 billion DRIVE target through network consolidation, automation, and procurement optimization, with sustainable structural cost reductions already embedded in its cost base. These are not one-time benefits but structural changes that will drive higher operating margins for years to come, even if revenue growth remains modest.
Meanwhile, the planned June 2026 spin-off of its Freight division will unlock trapped value and create a powerful pure-play LTL carrier that trades at a premium to conglomerate valuations. The remaining Express and Ground operations will offer higher-margin, higher-growth characteristics more attractive to growth investors, while Freight will appeal to value and income-oriented investors seeking LTL exposure.
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 the latest fiscal year; and FedEx Freight, which ships a variety of products by truck (11%, 23%).
In FedEx’s fiscal 2026 first quarter, ended August 31, 2025, revenue rose 3.1%, to $22.24 billion from $21.58 billion a year earlier. That gain is due to better demand for air freight services, which offset lower ground service volumes.
Thanks to savings from a restructuring plan, earnings before unusual items rose 2.2%, to $912 million from $892 million. The company spent $500 million on share buybacks in the quarter, which is why earnings per share rose 6.4%, to $3.83 from $3.60.
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.
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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.
FedEx’s spinoff should unlock significant shareholder value
FedEx still plans to spin off its FedEx Freight operations as a separate company in June 2026. This business is a leading provider of less-than-truckload (LTL) services, which combines freight from multiple customers into a single vehicle. It accounts for about 10% of FedEx’s total revenue. The new shares will trade on the New York exchange under the “FDXF” symbol.
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.
Meantime, FedEx aims to improve its remaining operations with new fuel-efficient aircraft and upgrades to its major air freight processing hubs in Memphis and Indianapolis. That includes installing automated equipment to cut its labour costs.
Spinoffs tend to work out well for both the new firm and the former parent, as they let both of them focus on their main businesses. FedEx will structure the separation so that investors will only be liable for capital gains taxes when they sell their new shares. It expects to complete the transaction by June 2026. Notably, the new spinoff firm could also become an attractive takeover target.
FedEx also raised your quarterly dividend by 5.1% with the July 2025 payment. Investors receive $1.45 a share instead of $1.38. The new annual rate of $5.80 yields 2.2%.
Recommendation in Wall Street Stock Forecaster: FedEx Corp. is a buy.
