AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-3: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 3/6 · 31/10/2026
Moat44
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 2/4 · The extensive terminal footprint and integrated consolidation model support a bounded network-density advantage. LTL consolidation is an industry characteristic, and superior costs versus existing LTL carriers are unproven.
durability · 2/4 · Almost 60 years of network development and capital-intensive infrastructure support persistence. Customer substitution, less capital-intensive competitors and temporary transition services limit confidence. Brand rights have an initial five-year term with conditional renewals, so brand permanence cannot be assumed.
customer dependency · 1/4 · The network serves supply chains, but disclosed carrier and mode substitution and price sensitivity indicate weak dependency. No demonstrated contractual lock-in or material switching friction is supplied; the disclosure does not prove realized customer defections.
erosion resilience · 2/4 · Annual profitability persisted despite declining shipments, but operating income fell materially in both fiscal comparisons. Adding the disclosed $492 million separation expense back to fiscal 2026 operating income still leaves earnings below fiscal 2025. This is mixed resilience, without proof of competitive share loss.
Pricing power38
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
realized pricing · 1/4 · Calendar 2025 composite revenue per shipment excluding fuel increased only from $313.80 to $314.15, with Priority essentially flat. Fiscal fourth-quarter 2026 base revenue per hundredweight declined slightly. Higher fuel surcharges supported fiscal 2026 yields, but underlying pricing was weak; shipment mix limits attribution.
retention · 2/4 · Annual shipment activity remained substantial at 22.4 million shipments in calendar 2025 versus 23.1 million in 2024, supporting continued demand with deterioration. This is an indirect operating assessment, not a measured customer retention rate. Customer substitution remains feasible, and repeat demand from the same customers is not established.
margin resilience · 1/4 · Operating income fell from $1,753 million in fiscal 2024 to $1,404 million in 2025 and $540 million in 2026. Excluding the disclosed $492 million separation expense does not remove the substantial deterioration. Profitability persisted, but margin protection was weak; pricing is not isolated as the cause.
contractual freedom · 2/4 · Implemented indexed fuel surcharges and reported historical fuel-cost recovery demonstrate some ability to adjust charges. Competitive pressures can constrain that ability. Customer contract duration, termination provisions and unilateral base-rate repricing rights are undisclosed, limiting the assessment to demonstrated surcharge flexibility.
Predictability—
At least three consecutive published annual periods are required for predictability; missing years are not skipped.
Financial strength—
Missing required inputs: netDebtEbitGrade. Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, an original issuer-reported unadjusted EBIT reconciled to net income, income tax and signed net interest, or reported pretax profit plus reported gross interest expense. Reported EBIT is distinct from GAAP operating income and gross interest. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- interestCoverageGrade
- 77.03
- currentRatioGrade
- 61.33
- Interest coverage (x)
- 9.47
- Current ratio (x)
- 1.52
Capital allocation—
Missing annual observations required by this category.
Management50
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Operating cash flow substantially exceeded capital expenditures in fiscal 2024–2025, and capital spending declined across the reported period. Fiscal 2026 cash generation weakened, partly because of reacquired receivables, while debt financed a large separation dividend to FedEx. These are mixed allocation outcomes with limited attribution to standalone management.
incentive alignment · 2/4 · Disclosed management holdings and forfeiture terms provide alignment mechanisms. Conditional change-of-control acceleration, separation-cost exclusions from actual incentive calculations and assumed future target performance in an adopted legacy-plan amendment weaken performance sensitivity. Terms and holdings are evidence of structure, not successful standalone incentive outcomes.
execution · 2/4 · The separation was completed, the issuer reported record-low DOT preventable accident performance, and annual operations remained profitable. Significant earnings deterioration and continuing transition-service dependencies offset these achievements. Financial execution is assessed from indirect operating evidence; comparative service outcomes are absent.
governance · 2/4 · A majority-independent board, assigned committee oversight and conflict-recusal requirements are actual safeguards. Staggered three-year board terms until the fifth annual meeting constrain immediate accountability. The independent company's governance effectiveness has little demonstrated history.
Evidence
As of June 1, 2026, we had approximately 40,000 employees, over 365 locations, including approximately 355 shipping terminals (over 320 of which are in the United States) and approximately 10 linehaul relay sites, and nearly 30,000 motorized vehicles, of which nearly 17,000 are tractors, across all 50 U.S.
Business — Company Overview; operating footprint as of June 1, 2026 · Filed 05/08/2026
Our robust network established through almost 60 years of operations and consisting of more than 26,000 service center doors strategically positioned in high-demand regions provides critical services that facilitate the transport of goods in North America and powers the supply chains of our customers.
Business — network history and service center doors · Filed 05/08/2026
Our LTL portfolio consists of two complementary service offerings designed to address distinct customer shipping requirements, serving both time-critical and cost-sensitive freight across a single integrated network:
Business — complementary services across one integrated network · Filed 05/08/2026
LTL carriers utilize network-based production logic to link different shipments into multi-stop routes and benefit from a semi- or fully-scheduled linehaul.
Business — LTL shipment consolidation and scheduled linehaul · Filed 05/08/2026
This makes LTL generally more cost-effective than TL for shipments smaller than a full trailer, due to its hub-and-spoke routing model with cross-docking across terminals.
Business — industry-wide LTL economics relative to truckload · Filed 05/08/2026
Our operations are capital intensive, characterized by significant investments in vehicles and trailers, facilities, ground support and dock equipment, and technology.
Business — capital intensity · Filed 05/08/2026
We also face competition from outside the LTL freight transportation industry, including from regional transportation providers that operate smaller and less capital-intensive transportation networks and startup companies.
Competition — smaller and less capital-intensive transportation networks · Filed 05/08/2026
For example, Amazon has announced the offering of its internal freight and other transportation and logistics capabilities more broadly to third parties.
Competition — Amazon's announced third-party transportation offering · Filed 05/08/2026
Customers may shift to other LTL providers or modes of transportation for a variety of reasons, including in response to capacity, service, and pricing issues.
Competition — customer substitution between carriers and transportation modes · Filed 05/08/2026
ANNUAL OPERATING STATISTICS
(Unaudited)
Twelve Months Ended
December 31,
2025
2024
Operating Statistics
Operating days
253
254
Total shipments
22,362,881
23,071,534
Total tonnage
10,309,718
10,712,940
Tonnage per day
40,750
42,177
Average daily shipments:
Priority
60,784
62,249
Economy
27,607
28,584
Total average daily shipments
88,391
90,833
Weight per shipment (pounds):
Priority
933
955
Economy
897
870
Composite weight per shipment
Annual operating statistics — calendar 2025 versus calendar 2024 shipments and tonnage · Filed 06/08/2026
CONSOLIDATED STATEMENTS OF INCOME (IN MILLIONS, EXCEPT PER SHARE DATA) Years ended May 31, 2026 2025 2024 Revenue $ 8,795 $ 8,892 $ 9,424 Operating expenses: Salaries and employee benefits 4,276 4,157 4,177 Purchased transportation 807 807 873 Rentals 308 295 287 Depreciation and amortization 512 471 455 Fuel 486 457 571 Maintenance and repairs 343 362 358 Separation and other costs 492 — — Other 1,031 939 950 Total operating expenses 8,255 7,488 7,671 Operating income 540 1,404 1,753 Other income (expense): Related party interest income 351 388 330 Interest expense (57) — — Interest income 41 — — Other, net 9 10 (4) Total other income 344 398 326 Income before income taxes 884 1,802 2,079 Provision for income taxes 229 456 505 Net income $ 655 $ 1,346 $ 1,574 Earnings per share: Basic $ 4.38 $ 9.00 $ 10.53 Diluted $ 4.38 $ 9.00 $ 10.53 Weighted-average shares outstanding: Basic 149,505,248 149,505,248 149,505,248 Diluted 149,505,248 149,505,248 149,505,248 The accompanying notes are an integral part of these consolidated financial statements.
Consolidated statements of income — fiscal 2026, 2025 and 2024 · Filed 05/08/2026
The services, including certain support functions such as order creation, customer data management, marketing, clearance, data and analytics, and other functions, as well as the technology operations and support technologies required for those functions, are provided for a limited time, generally for no longer than two years following the effective time, and are provided for specified fees, which are generally based on previous allocation models and/or on a cost/cost-plus basis.
Related transactions — Transition Services Agreement scope, duration and fees · Filed 05/08/2026
were partially offset by lower volumes and a slight decline in base revenue per hundredweight.
Fourth-quarter fiscal 2026 financial summary — lower volumes and base revenue per hundredweight · Filed 25/06/2026
Revenue per Shipment Full-Year Results
Twelve Months Ended
December 31,
2025
2024
Priority revenue per shipment (GAAP)
$359.77
$361.48
Fuel
57.78
59.46
Priority revenue per shipment, excluding fuel surcharges (non-GAAP)
$301.99
$302.02
Economy revenue per shipment (GAAP)
$407.09
$407.58
Fuel
66.18
68.15
Economy revenue per shipment, excluding fuel surcharges (non-GAAP)
$340.91
$339.43
Composite revenue per shipment (GAAP)
$374.55
$375.99
Fuel
60.40
62.19
Composite revenue per shipment, excluding fuel surcharges (non-GAAP)
$314.15
$313.80
Revenue per Shipment 2025 Quarterly Results
Three Months Ended
March 31,
2025
June 30,
2025
September 30,
2025
December 31,
2025
Priority revenue per shipment (GAAP)
$357.21
$356.95
$361.80
$363.45
Fuel
55.95
54.96
60.37
60.06
Priority revenue per shipment, excluding fuel surcharges (non-GAAP)
Revenue per shipment reconciliation — calendar 2025 and 2024, including fuel exclusions · Filed 06/08/2026
During 2026, higher fuel prices positively affected yields through increased fuel surcharges and negatively affected fuel expenses.
MD&A — fiscal 2026 fuel surcharges and fuel expenses · Filed 05/08/2026
To date, we have been mostly successful in mitigating over time the expense effect of higher fuel costs through our indexed fuel surcharges, as the amount of the surcharges is closely linked to the market prices for fuel.
MD&A — reported historical fuel-cost recovery through indexed surcharges · Filed 05/08/2026
If we are unable to maintain or increase our fuel surcharges because of competitive pricing pressures or some other reason, fuel costs could materially and adversely affect our operating results.
MD&A — competitive constraints on fuel surcharge recovery · Filed 05/08/2026
The freight transportation market is highly competitive and sensitive to price and service levels.
Competition — price and service sensitivity · Filed 05/08/2026
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) Years ended May 31, 2026 2025 2024 OPERATING ACTIVITIES Net income $ 655 $ 1,346 $ 1,574 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 449 416 404 Provision for uncollectible accounts 91 19 11 Other noncash items including leases and deferred income taxes 237 228 157 Stock-based compensation 13 10 12 Separation and other costs, net of payments 135 — — Changes in assets and liabilities: Receivables (1,153) — (9) Other current assets (39) 16 22 Accounts payable and other liabilities (169) (255) (233) Due to Parent, net (32) (255) (397) Other, net (20) 6 — Cash provided by operating activities 167 1,531 1,541 INVESTING ACTIVITIES Capital expenditures (379) (437) (461) Proceeds from asset dispositions and other 16 52 58 Cash used in investing activities (363) (385) (403) FINANCING ACTIVITIES Principal payments on debt (26) (63) (1) Proceeds from debt issuances 4,271 — — Net transfers to Parent (3,910) (1,077) (1,125) Cash provided by (used in) financing activities 335 (1,140) (1,126) Effect of exchange rate changes on cash 3 (3) 1 Net increase in cash 142 3 13 Cash at beginning of period 109 106 93 Cash at end of period $ 251 $ 109 $ 106 The accompanying notes are an integral part of these consolidated financial statements.
Consolidated statements of cash flows — fiscal 2026, 2025 and 2024 · Filed 05/08/2026
Cash flows from operating activities decreased $1.4 billion in 2026 primarily due to lower net income and working capital changes, driven by an increase in accounts receivable related to approximately $1.0 billion of reacquired outstanding U.S.
Liquidity — operating cash flow decline and reacquired receivables · Filed 05/08/2026
This arrangement is not reflective of the manner in which we would have financed our domestic operations had we been a stand-alone business separate from FedEx during the periods presented.
Liquidity — limitation of historical parent financing arrangements · Filed 05/08/2026
Item 8.01 Other Events.
In connection
with the Spin-Off, the Company paid a cash dividend of approximately $4.1 billion to FedEx prior to the Effective Time (the “Cash
June 1, 2026 Form 8-K — pre-separation cash dividend to FedEx · Filed 01/06/2026
Dividend”) from the proceeds of the $3.7 billion senior notes offering completed in February 2026 and borrowings under theTerm Loan Facility.
June 1, 2026 Form 8-K — debt financing of the separation dividend · Filed 01/06/2026
Except as described above, if a participant’s service terminates prior to the applicable vesting, measurement, or payment date, the participant’s unvested LTIP PSUs, LTIP RSUs, and Spin-Off RSUs will be forfeited.
Executive compensation — forfeiture of unvested standalone equity awards · Filed 05/08/2026
Pursuant to the terms of the 2026 Plan, upon a change of control of FedEx Freight, the LTIP RSUs and the Spin-Off RSUs, if not assumed or substituted in connection with the change of control, will immediately vest and the performance conditions with respect to the LTIP PSUs, if not assumed or substituted in connection with the change of control, will be deemed achieved at the greater of target and actual performance levels as of the date of the change of control.
Executive compensation — conditional change-of-control acceleration · Filed 05/08/2026
As discussed above under “2026 FedEx Compensation Elements — 2026 AIC Plans,” costs associated with the Spin-Off were excluded from 2026 adjusted FedEx Freight segment operating income as reported by FedEx for purposes of the 2026 FedEx Freight AIC Plan in order to more accurately reflect FedEx Freight’s core financial performance.
Executive compensation — exclusion of separation costs from fiscal 2026 incentive calculations · Filed 05/08/2026
On June 1, 2026, the HRCC approved amendments to the FY26-FY28 FedEx LTI plan, which was assumed by FedEx Freight in connection with the Spin-Off and which is based on a May 31 fiscal year end, to (i) measure actual performance through May 31, 2026 using the original performance goals and (ii) assume target performance for the remaining period, with payouts to be calculated using a weighted average of actual performance measured through May 31, 2026 and target performance for the remainder of the plan period.
Executive compensation — adopted June 1, 2026 amendment assuming future target performance · Filed 05/08/2026
Brad Martin
45,439(4)
–
*
John A. Smith
16,517(5)
219,635
*
Jeffrey A.
Security ownership — disclosed holdings as of July 27, 2026 · Filed 05/08/2026
As discussed elsewhere in this Annual Report, on June 1, 2026, we completed the Spin-Off and became an independent, publicly traded company.
Annual report — completed separation on June 1, 2026 · Filed 05/08/2026
Achieved Record-Low Department of Transportation (DOT) Preventable Accident Performance, Underscoring
Commitment to Safety Above All
Completed Spin-off from FedEx Corp.
June 25, 2026 earnings release — reported record-low DOT preventable accident performance · Filed 25/06/2026
Corporate Governance Guidelines and Code of Conduct The Board is comprised of a majority of independent directors and committed to the highest quality of corporate governance and accountability to the FedEx Freight stockholders.
Corporate governance — majority-independent board · Filed 05/08/2026
The Board has delegated to each of its committees responsibility for the oversight of specific risks that fall within the committee’s areas of responsibility, including: •The Audit Committee oversees the guidelines and policies that govern the processes by which we assess and manage our exposure to risk and our major financial and other risk exposures and the steps management has taken to monitor and control such risk exposures; •The HRCC oversees the relationship between our compensation policies and practices and our risk management, including the extent to which those policies and practices create risks for the Company, and review management’s conclusions regarding whether any risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on the Company; •The Governance Committee considers risks related to succession planning and corporate governance; and •The ROC oversees our cyber and technology-related risks, including network security, information and digital security, data privacy and protection, and risks related to emerging technologies such as artificial intelligence and machine learning, and the steps management has taken to identify, assess, monitor, manage, and mitigate those risks, and risks relating to our political activities and expenditures, along with management of sustainability- and climate-related risks.
Corporate governance — delegated committee risk oversight · Filed 05/08/2026
The Corporate Governance Guidelines require our directors to disclose actual or potential conflicts of interest and not to participate in any recommendation or decision regarding any transaction in which they have a direct or indirect material interest.
Corporate governance — conflict disclosure and recusal requirements · Filed 05/08/2026
The Board is divided into three classes with staggered three-year terms
June 1, 2026 Form 8-K — staggered board terms · Filed 01/06/2026
until the fifth annual meeting of the Company’s stockholders following the Spin-Off.
June 1, 2026 Form 8-K — duration of classified board structure · Filed 01/06/2026
The license granted to us under the Trademark License Agreement is for an initial term of five years from the effective date of the Spin-Off, and will automatically renew annually in one-year increments for up to an additional five years unless either party provides the other with notice of its election not to renew, and is not otherwise terminable by Federal Express other than in connection with a material uncured breach by FedEx Freight, bankruptcy of FedEx Freight, or a change of control of FedEx Freight.
Related transactions — trademark license duration, renewal and termination · Filed 05/08/2026
Fourth quarter and full-year fiscal 2026 results included herein are as reported in the FedEx Freight segment
June 25, 2026 earnings release — segment reporting basis · Filed 25/06/2026
results of FedEx Corporation and not presented on a carve-out basis.
June 25, 2026 earnings release — results are not on a carve-out basis · Filed 25/06/2026
