FedEx Corporation (FDX) shares surged over 7% in after-hours trading on Thursday, driven by two key factors: better-than-expected fiscal second-quarter earnings and a significant strategic move to spin off its freight business.
For the quarter ended November 30, 2024, FedEx reported adjusted earnings per share (EPS) of $4.05, surpassing analysts' estimates of $3.90. However, revenue of $22 billion narrowly missed the consensus estimate of $22.11 billion, declining 0.9% year-over-year.
The solid earnings performance was attributed to cost reduction benefits from the company's DRIVE program initiatives and higher base yields across its transportation segments. However, FedEx Freight's lower-than-expected revenue and profit, due to sustained weakness in U.S. industrial production, weighed on the overall results.
In a significant development, FedEx announced its intention to spin off its FedEx Freight less-than-truckload (LTL) business into a separate publicly traded company. The separation, expected to be completed in a tax-efficient manner within the next 18 months, aims to unlock value for FedEx and its shareholders by allowing each business to focus on its respective market dynamics and growth strategies.
"This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market," said Raj Subramaniam, FedEx Corp. president and CEO. "Through this process, we will unlock value for our Freight business and position FedEx to create even greater value for stockholders."
