Key Highlights

  • Revenue increased 8% to $2,442 million from $2,259 million in the third quarter of 2025.
  • Diluted EPS landed at $0.98, compared with $1.95 a year earlier.
  • Operating income of $253 million fell 13%, and Operating Margin came in at 10.4% versus 12.8%.
  • Separation and other costs totaled $105 million, against $30 million a year ago.
  • Composite Revenue per shipment rose 10% to $412.05.

Revenue rises on Yield while shipments slip

FedEx Freight (NYSE:FDXF), a North American provider of less-than-truckload freight transportation with priority and economy services, reported results for the three months ended September 30, 2026 in its quarterly filing. It became an independent public company on June 1, 2026, when its parent FedEx (NYSE:FDX) distributed about 80.1% of its shares to shareholders.

Revenue grew 8% to $2,442 million, mainly on higher fuel surcharges and favorable base yield, partly offset by lower volume. Composite revenue per shipment climbed 10% to $412.05, while average daily shipments dipped 1% to 89,105 on softer Demand linked to macroeconomic conditions. Economy shipments fell 4% a day, while priority edged up 1%.

Operating income drops as separation costs rise

Operating income was $253 million, down 13% from $290 million, and operating margin narrowed to 10.4% from 12.8%. Separation and other costs increased to $105 million from $30 million, mainly consulting and advisory fees tied to the spin-off and employee costs from dissolving a retiree healthcare plan.

Adding those costs back, Operating Income would be about $358 million versus $320 million a year earlier on a calculated basis, a margin of roughly 14.7% against 14.2%. Operating supplies and expenses rose 16% to $546 million, driven by outside services, professional fees and technology costs for stand-alone operation.

Interest expense takes the place of interest income

Below the operating line, the picture shifted sharply. Last year the Business recorded $98 million of related party interest income from its cash arrangement with its former parent, which ended before the spin-off. This quarter it booked $55 million of interest expense on Debt raised for the separation, plus $5 million of interest income.

Income before taxes was $204 million, down from $391 million. The effective tax rate was 27.5% versus 25.5%, and Net Income came to $147 million against $291 million, a 49% decline.

Debt, cash and a transition period

FedEx Freight carries about $4.2 billion of the $4.3 billion borrowed for the spin-off, at an estimated weighted average rate of 4.82%. It applied substantially all of the proceeds to roughly $4.1 billion of cash paid to FedEx, and it also holds a revolving Credit Facility of up to $1.2 billion.

Cash stood at $388 million at September 30, 2026, compared with $251 million at May 31, 2026. Because the fiscal year-end moved to December 31, the filing presents a four-month transition period, during which Operating Cash Flow was $390 million against $1,085 million a year earlier. Capital expenditures reached $135 million in the quarter, versus $47 million.

Points to watch as the stand-alone company matures

The company expects capital expenditures of about $365 million for the seven months ending December 31, 2026, including technology needed to exit its Transition Services Agreement with FedEx, which generally runs no longer than 24 months.

Management expects softness in the industrial economy to weigh on LTL demand through the rest of 2026. Readers should watch shipment trends, whether yield gains hold and how quickly separation costs fade.