FedEx Freight (FDXF) Transition period summary

Executive summary

• First four months as a standalone business generated $3.281B revenue, up 9.2% YoY, and $510M adjusted operating income, up 16.4%; adjusted margin was 15.5% and adjusted diluted EPS was $2.15.

• Volume and base-yield trends showed signs of stabilization; Q4 guidance was raised, reflecting higher fuel expectations and early benefits from stabilizing trends.

• Operational, commercial, and technology initiatives advanced alongside $239M of free cash flow and $100M of debt repayment.

Financial highlights

• Four-month GAAP operating income was $383M, down 6.1% YoY; adjusted operating income was $510M, up 16.4%, including $127M of spin-off costs excluded from adjusted results.

• Four-month GAAP operating margin was 11.7%, down 190 bps; adjusted margin was 15.5%, up 90 bps YoY.

• Q3 revenue was $2.442B, up 8% YoY; operating income fell 13% to $253M and net income fell 49% to $147M.

• Four-month net income was $230M versus $404M; diluted EPS was $1.54 versus $2.70, while adjusted diluted EPS was $2.15 versus $2.85.

• Four-month free cash flow was $239M; cash provided by operations was $390M and capital expenditures were $151M.

Outlook and guidance

• Q4 revenue guidance is $2.30B–$2.37B, adjusted operating income $185M–$205M, adjusted margin 8.0%–8.6%, and adjusted EPS $0.65–$0.75; outlook was raised with higher fuel assumptions and stabilizing volume and base yield.

• Seven-month transition-period outlook is revenue $5.58B–$5.65B, adjusted operating income $695M–$715M, adjusted margin 12.5%–12.7%, and adjusted EPS $2.80–$2.90.

• Calendar 2027 revenue growth and adjusted operating margin expectations are broadly in line with the medium-term framework: 4%–6% revenue CAGR and 10%–12% adjusted operating income CAGR; >$1B free cash flow targeted by 2029.

• 2027 adjusted operating income fall-through is expected at ~30% or slightly higher; detailed business-plan outlook planned for January.

• Outlooks assume current economic and fuel expectations; MTM retirement-plan adjustments are excluded from EPS and tax-rate forecasts and could materially affect results.