FedEx Freight CEO says the spinoff will help the company ‘leapfrog’ competitors
FedEx Shipping CEO John Smith said Monday he was leaving the company Fedex will allow it to invest more aggressively in growth initiatives and better compete in the less-than-truckload shipping market.
“The things we can control now, especially from a capital and investment perspective, will be able to put LTL-specific dollars into the LTL company… That will help us get ahead of our competitors,” Smith said on CNBC’s “Mad Money.”
FedEx Freight began trading as an independent company on Monday after being spun off from FedEx. The company is the largest non-truckload (LTL) carrier in North America, a market that consolidates shipments from multiple customers onto the same truck, allowing businesses to move freight more efficiently rather than paying for an entire trailer. Among other competitors in the industry Old Dominion Freight Line, ArcBestAnd XPO.
Smith said the business often takes a backseat while operating within the larger transportation giant, where it generates roughly $9 billion in revenue compared to FedEx’s $90 billion.
But as an independent company, Smith said FedEx Freight plans to invest heavily in customer-facing technology, expand its dedicated sales force and increase profitability.
“All of these things will level the playing field and also allow us to get a step ahead, which we’ve worked very hard on throughout the year,” Smith said.
The company has set a goal of reaching a 15% operating margin by 2029, up from today’s roughly 12%, but Smith suggested there could be additional growth beyond that target.
“This is not the ceiling,” he said.
Trucking activity is seen as closely tied to the broader U.S. economy, so Wall Street often looks to companies in the sector as economic barometers. For the same reason, investors consider stocks to be economically sensitive.
Smith expressed confidence that FedEx Freight can grow even if the economy is weak, pointing to opportunities to simultaneously gain market share and increase margins.
“With our strategy, we think we can grow in a down economy. So we feel good about our short, medium and long-term strategy,” he said.
