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Truckload Tightness Boosts FedEx Freight Backhauls, Revenue
Capacity Constraints Boost Largest LTL Player’s First Stand-Alone Results
Key Takeaways:
- <p>FedEx Freight said truckload market tightness boosted fiscal fourth-quarter earnings as heavier backhaul spillover supported revenue in the quarter ended May 31.</p>
- <p>Revenue rose 4.8% to $2.41 billion, driven by fuel surcharges and higher shipment weight despite lower volume, the company said.</p>
- <p>Executives said FedEx Freight expects 4%-6% revenue growth through 2026 as it targets LTL customers and higher-margin verticals after spinoff.</p>
Truckload market tightness as a result of capacity constraints boosted FedEx Freight earnings in the three months that ended May 31, according to company executives.
FedEx Freight — the largest less-than-truckload carrier in North America — benefited especially from spillover in backhaul lanes with heavier shipments, the executives said during the company’s fourth-quarter fiscal 2026 earnings call June 25.
“We are seeing some of the truckload pricing reach levels that now we are a very good option for that,” Chief Financial Officer Marshall Witt told analysts and investors. “It is benefiting not only our balance, but it is also benefiting our revenue.”
FedEx Freight posted $2.41 billion in revenue in the most recent quarter, a 4.8% increase compared with $2.30 billion in the year-ago period.
The three months through May 31 were the Memphis, Tenn.-based carrier’s final quarter as part of FedEx Corp. following its spinoff from the parent company June 1.
The increase in revenue was primarily driven by the favorable impact of fuel surcharges and higher weight per shipment, although this was partially offset by lower volume and a slight decline in base revenue per hundredweight, the company said. The carrier’s weight per shipment averaged 948 pounds, a 3% increase compared with 920 pounds in the year-ago period.
FedEx Freight, which now trades under the FDXF ticker, posted average daily shipments of 86,734 in the most recent quarter, a 5.9% decrease compared with 92,129 a year earlier. Revenue per shipment averaged $415.22, an 11.5% increase compared with $372.55 in the year-ago period.
Capacity in the truckload sector has tightened since the start of 2026 as a result of federal government enforcement initiatives on non-domiciled commercial driver licenses, the closing of some driving schools and visas for overseas drivers.
As a result, FedEx Freight CEO John Smith told analysts: “We have seen some of those [truckload] volumes transition over back to us. The thing about it is, it’s really helping us not only in backhaul, but some of those larger shipments that would normally run as milk runs from a truckload perspective. They’re going back to a full truckload, which are pushing those bigger shipments back into the LTL market.”
FedEx Freight, which is set to align to a calendar-year reporting schedule, is optimistic about the prospects for the freight market, Smith and Witt said.
While volume was softer in the most recent quarter, the trend line is now reversing, the company’s top executive said.
Smith told Transport Topics in late May that the freight market’s recovery would see bumps in the road.
But in the call with analysts, he noted: “We are seeing some pretty good encouraging signs that demand conditions are beginning to stabilize and even increase across the industry. The leading indicators, as you well know, that we watch are the [Institute for Supply Management] manufacturing activity, trends in the truckload spot rates and capacity, and the early signals — the demand is showing positive signs across the industry.”
FedEx Freight now expects revenue growth through the rest of 2026 in the range of 4% to 6%, modestly above the expectations provided at its first investor day in April, which Witt said was due in part to the “dynamic fuel environment.”
The last average nationwide diesel price before the U.S. and Israel began bombing Iranian targets on Feb. 28 was $3.809 a gallon, according to Department of Energy data. The average reached $5.596 a gallon in the week that started May 18 and was last estimated at $4.832 a gallon June 22.
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While benchmark crude oil futures prices are now below prewar levels, the diesel supply chain is expected to take longer to readjust.
Revenue is also expected to see a boost from a more focused FedEx Freight, whose sales force will now pursue only LTL customers and has been tasked by Smith and the management team with targeting higher-margin verticals.
The executives laid out the pillars of that plan of attack during the April investor day. FedEx Freight aims to improve its market share in the small- to medium-size business, grocery, healthcare, data center and energy segments.
FedEx Freight has only minimal penetration in the $9 billion small- to medium-size business sector of the LTL market, Chief Specialized Services and Commercial Officer Mike Lyons said in April, with a high percentage of revenue from large corporate customers.
“Basically, we’re doing zero business in the food and beverage marketplace,” Smith told TT in late May. “We feel like that that’s one of the markets that does good — whether the market is good or the market is down — due to the fact that people are going to eat and people are going to drink.”
The company will also benefit from the relatively low level of unbundling of contracts inked before the spinoff.
Some 10% of the company’s revenue involves bundled contracts and has discounts averaging between 1%-3%, which Bank of America analyst Ken Hoexter said was significantly smaller than expected.
