FedEx Freight sets record profits amid strong demand for LTL shipments

Dive Brief:

FedEx Freight posted a record profit of $175 million in the fourth quarter of 2018, according to a company earnings call. "We're seeing very strong demand for our services in the freight sector," Mike Ducker, president and CEO of FedEx Freight, said in the call.
David Cunningham, president and CEO of FedEx Express, said "solid" growth in freight traffic along with higher freight rates contributed to revenue growth in FedEx's freight services.
The logistics provider is also modernizing its air fleet by ordering 24 new aircraft from Boeing, which will be delivered between fiscal years 2020 and 2025.

Dive Insight:

While freight costs and capacity issues are creating headwinds for many shippers, they're a nice tailwind for carriers and logistics providers like FedEx.

"We are very pleased with the Freight's performance in FY18, look forward to continued success in FY19," Dave Bronczek, FedEx president and chief operating officer, said.

FedEx as a whole is the second most valuable logistics brand, behind UPS, and grew in value 6% between 2017 and 2018. Much of the growth behind FedEx Freight comes from high demand for less than truckload (LTL) shipments and last-mile deliveries, as e-commerce continues to expand.

"FedEx is uniquely positioned on reach and flexibility of our networks to provide outstanding service, even for those larger and heavier deliveries," Ducker said. "Specifically for LTL, e-commerce is and will create opportunities for us."

FedEx initially struggled with high volumes of shipments, especially during the holiday season, and on-time delivery rates fell. Through investing in its operations, however, the logistics provider achieved high on-time delivery rates in subsequent years.

"We continue to invest in technology that will prepare us better for the rapid modernization of supply chains," Ducker said.

FedEx has developed creative last-mile solutions, such as opening locations in retail stores, including Walmart and Walgreens. Walmart is on track to open FedEx Office locations in 500 stores.

"This program is all about convenience and brings FedEx ever closer to consumers," Raj Subramaniam, executive vice president and chief market and communications officer for FedEx, said in the call.