Key Highlights

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

Revenue climbs 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 on 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 increased 8% to $2,442 million, mainly on higher fuel surcharges and favorable base yield, partly offset by lower volume. Composite revenue per shipment rose 10% to $412.05, while average daily shipments fell 1% to 89,105 because of reduced Demand tied to macroeconomic conditions. Economy shipments dropped 4% a day, while priority edged up 1%.

Operating income falls as separation costs jump

Operating income was $253 million, down 13% from $290 million, and operating margin narrowed to 10.4% from 12.8%. Separation and other costs rose 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 grew 16% to $546 million on outside services, professional fees and technology costs for stand-alone operation.

Interest expense replaces interest income

Below the operating line, the picture changed sharply. Last year the Business booked $98 million of related party interest income from its cash arrangement with its former parent, which ended before the spin-off. This quarter it recorded $55 million of interest expense on Debt taken on 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 was $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 used substantially all proceeds to fund roughly $4.1 billion of cash to FedEx, and it also has a revolving Credit Facility of up to $1.2 billion.

Cash was $388 million at September 30, 2026, versus $251 million at May 31, 2026. Because the fiscal year-end moved to December 31, the filing presents a four-month transition period, in 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.

What 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 lasts no longer than 24 months.

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