fedex cargo CEO John Smith announced the separation from the company on Monday. fedex This will allow us to invest more aggressively in growth initiatives and increase our competitiveness in the sub-truckload transportation market.
“What we’ll have control over going forward, especially from a capital and investment standpoint, is being able to put LTL-specific capital into LTL companies…That’s going to help them leapfrog their competitors,” Smith said on CNBC’s “Mad Money.”
FedEx Freight spun off from FedEx on Monday and began trading as an independent company. The company is North America’s largest less-than-truckload (LTL) carrier, a market that consolidates shipments from multiple customers onto the same truck, allowing businesses to transport freight more efficiently than paying for an entire trailer. Other competitors in the industry include: old dominion freight line, arc vestand XPO.
Smith said the company was often put on the back burner while operating in-house at the transportation giant, which had revenues of about $9 billion compared to FedEx’s $90 billion.
But Smith said that as an independent company, FedEx Freight plans to invest heavily in customer-facing technology, expand its dedicated sales force and improve profitability.
“All of these things are things that level the playing field and allow us to take a leap forward. We’ve been working very hard on them this past year,” Smith said.
The company has set a goal of increasing its operating margin from the current 12% to 15% by 2029, and Smith hinted that it may exceed that goal.
“It’s not a ceiling,” he said.
Because the activities of the trucking industry are considered to be closely linked to the overall U.S. economy, Wall Street typically looks to companies within the industry as a barometer of the economy. For the same reason, investors consider their stocks to be economically sensitive.
Smith expressed confidence in FedEx Freight’s ability to grow despite the economic downturn, noting that the company has an opportunity to gain market share and improve profit margins at the same time.
“With our strategy, we feel we can grow even in a downturn. That’s why we’re comfortable with our short-term, medium-term and long-term strategy,” he said.
