April 8 (Reuters) – FedEx Freight, the trucking company separating from the overnight delivery firm this summer, is expected to report an operating margin of 12% this year, incoming CEO John Smith told investors on Wednesday.
That is based on expected revenue of $8.7 billion and adjusted operating income of $1.1 billion, Smith said at the first investor day for the trucking company scheduled to be spun out of FedEx into an independent, publicly listed company on June 1.
Prior to the meeting, FedEx Freight – which competes with the likes of XPO, Saia and Old Dominion Freight Line – said it expects average core profit growth in the range of 10% to 12% over the medium term.
FedEx Freight, the largest provider of less-than-truckload (LTL) services in the U.S., also sees average revenue growing in the range of 4% to 6% in the medium term.
FedEx Freight’s forecasts come as higher U.S. diesel prices delay a long-awaited trucking industry turnaround and squeeze cash flow and profits for independent big-rig drivers.
Analysts have said they believe FedEx Freight’s assets were not fully appreciated within FedEx and that being a separate public entity would help it expand in the LTL trucking market that involves carrying multiple shipments from different customers on a single truck.
(Reporting by Lisa Baertlein in Los Angeles and Nandan Mandayam in Bengaluru; Editing by Sahal Muhammed and David Holmes)
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