SHOW NOTES #062      

The next big LTL shakeup? FedEx explores options for Freight division

Source: TRUCKING DIVE

Any sale or spinoff would follow a shift by large carriers toward pure-play operations — and could further consolidate an LTL sector still reeling from Yellow’s demise.

Dive Brief:

• FedEx is reviewing the role of FedEx Freight in its portfolio structure, President and CEO Raj Subramaniam said on a Q4 earnings call Tuesday, hinting at a possible sale or spinoff of the LTL carrier.
• Any such move of the largest LTL carrier by revenue would come as the parcel giant searches for savings, efficiencies and more stability in its revenues.
• The parcel giant and its external advisers plan to complete the review by the end of the calendar year, Subramaniam said.

Dive Insight:

Any sale or spinoff of the unit would follow a shift by other big carriers toward pure-play LTL operations popular with investors — and could consolidate an industry still reeling from Yellow Corp.’s demise last year. 

UPS sold its UPS Freight division, formerly known as Overnite Corp., to TFI International for $800 million in 2021. TFI renamed the company TForce Freight.

TFI is planning to spin off Daseke and its other truckload holdings into a separate TL company.

XPO shed its brokerage and warehousing holdings via spinoffs to become more of a pure-play operation and avoid what Wall Street refers to as a “conglomerate discount” on large companies’ stock prices.

FedEx Freight boasts the largest real-estate network of any U.S. LTL carrier, with about 400 service centers, according to its website. The business has more than 46,000 employees and more than 25,000 trucks.

Its Q4 operating income increased despite ongoing demand weakness, Subramaniam said. “In fact, because of our strong fourth quarter performance, Freight ended Fiscal Year 2024 with full-year operating margin equal to last year’s all-time high,” he said. 

A move for FedEx Freight would come as the parcel giant has moved to reduce costs and merge its Ground and Express units into a single entity. The company is on track to achieve its target of $4 billion in savings in FY 2025 compared to its FY 2023 baseline, Subramaniam told investors.

FedEx executives previously touted Freight’s synergies with its other operating units, such as providing linehaul services for FedEx Ground, and allowing it to sell its parcel and LTL services together. “We are the really only provider to bundle our parcel and LTL portfolio,” EVP and Chief Customer Officer Brie Carere said in a 2022 earnings call.

Subramaniam’s comment Tuesday got investors’ attention, as FedEx’s stock jumped 13% in pre-market trading on Wednesday, according to Seeking Alpha.

It also set abuzz a Facebook group of truck drivers, who debated whether it meant a sale would happen and which potential suitor would be best for FedEx Freight employees.

One driver wanted Old Dominion Freight Line to buy the LTL, adding with a laughing emoji: “I want to know what it feels like to drive a 70mph truck.”

Colin Campbell Senior Reporter 

BOTH STORIES

Saia reopens Yellow terminals in Texas, California, Minnesota

The site in Laredo, Texas, one of the carrier’s most expensive acquisitions, will support its partnership with Fletes México.

Dive Brief:

• Saia reopened three former Yellow Corp. terminals to bolster its Mexico cross-border, Upper Midwest and Southern California operations, the LTL carrier announced this month.
• Saia purchased the facilities in Laredo, Texas, and Owatonna, Minnesota, among its 17 acquisitions in its defunct competitor’s bankruptcy auction. It also acquired the lease to the Orange, California, site near Anaheim along with 10 other former Yellow leases.
• “With each new terminal, we remain committed to providing industry leading service,” Saia EVP of Operations Patrick Sugar said in a statement. “Our success is built on our ability to duplicate our service excellence in new locations.”

Dive Insight:

The Laredo facility was one of the most coveted in Yellow’s bankruptcy real estate auction last year, and Saia bought the property for $51 million. The site and another near Trenton, New Jersey, accounted for more than half of Saia’s spending on properties at the auction.

The Laredo terminal will offer onsite warehousing and support Saia’s partnership with Fletes México, the company said.

“This terminal is important to our operations as it will serve as one of two gateway terminals to Mexico, in addition to enhancing our service across the Central and Southern U.S., supporting the local economy with job opportunities and improved shipping services,” VP of Operations, West Kevin Szydel said in the announcement.

The Johns Creek, Georgia-based carrier is hustling alongside competitors like XPO and Estes Express Lines to renovate and rebrand their respective former Yellow terminals. All are aiming to get them open as soon as possible to add capacity in advance of a long-awaited freight demand rebound.

Saia previously opened facilities in Montana, New Jersey, Texas and Utah, and the company plans to open up to 16 terminals this year. Reopened former Yellow terminals represent only a quarter of its $1 billion in planned capital expenditures.