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FedEx Freight's Smith: Recovery Won’t Be in a Straight Line
CEO Says Long Downcycle Has Ended but Uncertainty Still Clouds Outlook
Key Takeaways:
- FedEx Freight CEO John Smith said the industry’s long downcycle has ended, but warned the freight market’s recovery will be uneven despite rising rates in early 2026.
- Spot and contract rates rose in the first five months of 2026 after more than 3½ years of decline, though inflation, diesel prices and trade policy risks cloud outlook.
- As FedEx Freight began trading June 1, the carrier targets a 12% operating margin in fiscal 2026 and 15% by 2029 amid uncertain demand.
Carriers and shippers can expect a few bumps on the freight market’s road to recovery even as rates continue to climb, warned FedEx Freight CEO John Smith.
“We see green shoots, but with everything going on from a geopolitical perspective,” Smith told Transport Topics. “I think there is truly opportunity for the market to turn, [but] we don’t expect the recovery to happen in a straight line.”
Spot and contract rates shot higher in the first five months of 2026 after over 3½ years of a downcycle that was the longest in industry memory.
Still, concerns remain about the recovery’s longevity as a result of the specter of interest rate hikes due to inflation worries; higher diesel prices due to the conflict between the United States, Iran and Israel; plus ongoing trade policy concerns.
“We believe the long-term fundamentals of this industry, the LTL industry, remain attractive,” Smith told TT in an exclusive interview ahead of FedEx Freight’s June 1 debut on the New York Stock Exchange as a stand-alone carrier.
FedEx Freight ranks No. 1 among LTL carriers on TT’s list of the largest players in the freight segment.
Currently, the company has 365 locations, around 26,000 service center doors and about 30,000 vehicles, including 17,000 trailers.
Smith told analysts during the company’s first investor day in April that FedEx Freight would have revenue of $8.7 billion and an operating margin of 12% in fiscal 2026, but the company expects compound annual revenue growth of 4%-6% in the medium term.
Revenue growth is set to be driven by a stand-alone sales team and technology tailored to FedEx Freight’s needs.
“We’re going to step off with about a 12% margin and there’ll be a little bit of a dip there in what we call our transition year, the seven months through the rest of the calendar year 2026,” he told TT, but added: “We’ll be operating at a 15% margin by 2029.”
Smith, who rang the NYSE bell June 1, said the carrier was well-positioned to meet its goals even if the market recovery is not as smooth as many observers hope.
“We feel like that our network is differentiated. We’re the largest and we’re the fastest,” he said, noting that the company also has both priority and economy offerings.
“As we move forward, we feel like that we can operate in a soft freight market and we’re going to operate in a good market. Right now, we believe we’re positioned to benefit as the demand stays soft or demand improves. We feel really good with where we sit,” he said
FedEx Corp. entered the LTL space in 1998 with the acquisition of Viking Freight, expanded its regional network in 2001 with the purchase of American Freightways and added longhaul capability in 2006 by taking over Watkins Motor Lines.
FedEx Freight’s common stock is listed on the NYSE under the ticker FDXF. FedEx Corp. announced the LTL carrier would be spun off in December 2024.
