Now that FedEx Freight is operating as an independent company, its next phase is pursuing opportunities where the carrier sees “a clear runway to growth,” President and CEO John Smith said on a call with analysts Thursday.
In the company’s inaugural earnings call following its spinoff from FedEx, Smith’s comments mirrored remarks made by other executives during the carrier’s investor day event in April. At that time, executives pointed to revenue opportunities serving small and medium-sized businesses, healthcare, grocery and expanding market share in technology, specifically serving data center customers.
Smith said these target segments are markets “where we have historically under penetrated” and offer attractive margins.
“Our strategy is centered on sustainable, high-quality growth that strengthens both our top line momentum as well as our long-term profitability,” he said.
FedEx Freight reported Q4 revenues of $2.4 billion, up 4.8% year over year. The carrier reported Q4 operating income of $158 million, down 66.9% YoY, while adjusted operating income fell 23.9% to $363 million.
While the company’s average daily shipments fell 5.9% YoY in Q4, revenue per shipment increased 11.5%. The carrier also reported weight per shipment increased 3% and revenue per hundred weight rose 8.2% from last year.
FedEx Freight differentiates itself from other LTL carriers through its dual-service model, according to Smith. This approach provides one- to three-day priority shipping and lower-cost three- to six-day economy shipping. Shippers have the flexibility to shift between services, depending on their needs.
“When you think about how successful we’ve been being able to keep customers when they want and need that fastest service in the market, but also sometimes needing that cost-effective economy that kept the customers from switching back and forth between competitors,” Smith said, adding, “it’s not an easy thing to do.”
He said the carrier’s shipping options and vast national network will aid the company as it secures new business, especially high-margin segments that offer larger revenue loads.
“We’re just getting our feet wet in some of these newer verticals and we feel like we’ve got an opportunity, especially in the data centers and electrical piece but also in the food and beverage to increase our weight per shipment,” Smith said.
