FedEx Corp. (FDX) has announced its intention to spin off its FedEx Freight unit into a separate publicly traded company, a move that has sent its stock soaring. The decision, revealed on December 19, 2024, is expected to create the largest less-than-truckload (LTL) carrier in North America by revenue. This strategic separation is anticipated to unlock significant value for FedEx's investors and streamline its operations.

The spinoff will result in two independent companies: FedEx and FedEx Freight. This decision follows a comprehensive assessment by FedEx's board of directors, which concluded that the separation would enhance strategic, operational, and financial execution for both entities. The process is set to begin immediately and is expected to be completed within 18 months, pending regulatory approvals.

FedEx Freight, with a revenue of $9.4 billion in fiscal 2024, has been a strong performer, increasing its operating profit by nearly 25% annually over the past five years. The separation is expected to allow FedEx Freight to maintain its leadership position in the LTL market, supported by a robust balance sheet.

The announcement has been well-received by the market, with FedEx shares rallying 8% following the news. Analysts have long anticipated this move, which has been a key factor in FedEx's stock performance in 2024, outpacing its competitor United Parcel Service Inc. (UPS).

FedEx CEO Raj Subramaniam stated that the timing is right for this separation, as it responds to the unique dynamics of the LTL market. The spinoff is expected to provide more customized operational execution and tailored investment strategies for both the global parcel and LTL markets.

The separation will also allow for distinct public stock listings, enhancing the value proposition for each company. FedEx Freight will continue to operate under its current name, and the benefits of the existing relationship between FedEx and FedEx Freight will be optimized through commercial agreements to maintain operational continuity.

This strategic move is seen as a testament to the strength of FedEx's business and its commitment to delivering value to its customers, team members, and stockholders. The spinoff is expected to create strategic opportunities for both companies, enabling them to capture profitable growth and unlock market value.