FedEx Freight CEO John Smith said on Monday the company’s separation from FedEx will allow it to invest more aggressively in growth initiatives and better compete in the less-than-truckload shipping market.
“The things that we are going to be able to control now, especially from a capital and investment perspective, be able to put dollars into the LTL company that are LTL specific … That’s going to help us leapfrog the competitors,” Smith said on CNBC’s “Mad Money.”
FedEx Freight began trading as an independent company Monday after being spun off from FedEx. The company is the largest less-than-truckload (LTL) carrier in North America, a market that combines shipments from multiple customers onto the same truck, allowing businesses to move freight more efficiently than paying for an entire trailer. Other competitors in the industry include Old Dominion Freight Line, ArcBest, and XPO.
Smith said the business often took a backseat while operating inside the larger transportation giant, where it generated roughly $9 billion in revenue compared with FedEx’s $90 billion.
As a standalone company, however, Smith said FedEx Freight plans to invest heavily in customer-facing technology, expand its dedicated sales force, and improve profitability.
“All those things are going to level the playing field and also allow us to leapfrog, we’ve been working on those very hard for the year,” Smith said.
The company has outlined a goal of reaching a 15% operating margin by 2029, up from roughly 12% today, though Smith suggested there could be additional upside beyond that target.
“That’s not the ceiling,” he said.
Trucking activity is seen as closely correlated to the broader U.S. economy, so Wall Street typically looks to companies within the industry as economic barometers. For the same reason, investors consider their stocks to be economically sensitive.
Smith expressed confidence in FedEx Freight’s ability to grow even if the economy is soft, pointing to opportunities to gain market share and improve margins simultaneously.
“With our strategy, we feel like that we can grow in a down economy. That’s why we feel good about our short, medium, and long-term strategy,” he said.
