{"schemaVersion":1,"research":true,"symbol":"fdxf","name":"FedEx Freight Holding Company","topic":"moat","path":"/stock/fdxf/moat","status":"published","version":4,"updatedAt":"2026-10-18T14:34:55.324Z","locked":false,"publicFairValue":false,"fairValue":null,"moat":{"verdict":"narrow","summary":"FedEx Freight's established terminal network supports a narrow consolidation and route-density cost advantage. Its physical scale is demonstrated, but superior costs versus other LTL carriers and realized pricing power are not established. Declining operating earnings, weaker demand and separation dependencies limit confidence in resilience. The evidence supports a narrow advantage with meaningful uncertainty about its strength as a standalone company.","advantages":[{"mechanism":"cost_advantage","claim":"An established network of approximately 355 shipping terminals and more than 26,000 service center doors enables freight consolidation and scheduled linehaul across many destinations. This operating infrastructure supports a narrow density-based advantage against less extensive networks; the passages do not demonstrate lower unit costs than established LTL rivals.","durability":"The network accumulated over almost 60 years and requires substantial facilities, vehicles and technology investment. Replication requires capital and operating coordination, but its economic benefit depends on maintaining sufficient shipment density.","risks":"Customers can change carriers or transportation modes. Smaller networks can be less capital intensive, broader freight capacity affects pricing, and declining demand can reduce network utilization. Separation adds costs and temporary dependence on former-parent services.","invalidation":"The advantage would be invalidated by sustained evidence that comparable service can be provided through smaller networks at equal or lower unit costs, or that persistent shipment losses prevent the terminal network from delivering consolidation savings after separation costs normalize.","competitors":["Amazon"],"evidenceIds":["e1","e2","e3","e4","e5"],"counterEvidenceIds":["e6","e7","e8","e9","e10","e11","e12"]}],"evidence":[{"id":"e1","sourceId":"filing-1","location":"Item 1, Business: operating footprint as of June 1, 2026","excerpt":"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."},{"id":"e2","sourceId":"filing-1","location":"Item 1, Business: network history and service center doors","excerpt":"Virgin Islands. 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."},{"id":"e3","sourceId":"filing-1","location":"Item 1, Business: shipment aggregation and scheduled linehaul","excerpt":"LTL carriers utilize network-based production logic to link different shipments into multi-stop routes and benefit from a semi- or fully-scheduled linehaul."},{"id":"e4","sourceId":"filing-1","location":"Item 1, Business: consolidation economics relative to truckload","excerpt":"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."},{"id":"e5","sourceId":"filing-1","location":"Item 7, MD&A: capital intensity","excerpt":"Our operations are capital intensive, characterized by significant investments in vehicles and trailers, facilities, ground support and dock equipment, and technology."},{"id":"e6","sourceId":"filing-1","location":"Item 1A, Risk Factors: smaller and less capital-intensive competing networks","excerpt":"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."},{"id":"e7","sourceId":"filing-1","location":"Item 1A, Risk Factors: freight capacity and pricing","excerpt":"Capacity levels in the broader freight transportation industry also influence demand and pricing for our services."},{"id":"e8","sourceId":"filing-1","location":"Item 1A, Risk Factors: named competitor's announced third-party offering","excerpt":"For example, Amazon has announced the offering of its internal freight and other transportation and logistics capabilities more broadly to third parties."},{"id":"e9","sourceId":"filing-1","location":"Item 1A, Risk Factors: customer carrier and mode substitution","excerpt":"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."},{"id":"e10","sourceId":"filing-1","location":"Item 8: consolidated statements of income, fiscal 2024–2026","excerpt":"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."},{"id":"e11","sourceId":"filing-1","location":"Item 1A, Risk Factors: experienced decline in transportation demand","excerpt":"We also have experienced, and may continue to experience, a decline in demand for our transportation services as inflation and elevated interest rates negatively affect consumer and business spending."},{"id":"e12","sourceId":"filing-1","location":"Item 13: transition services duration, functions and fees","excerpt":"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."},{"id":"e13","sourceId":"filing-1","location":"Item 1A, Risk Factors: price and service sensitivity","excerpt":"The freight transportation market is highly competitive and sensitive to price and service levels."},{"id":"e14","sourceId":"filing-1","location":"Item 1, Business: general LTL pricing drivers","excerpt":"Customer pricing for TL solutions is typically rigid with one price for the entire trailer, irrespective of the shipment size, while LTL offerings are typically more flexible, with origin, destination, class, and weight being the drivers of price."},{"id":"e15","sourceId":"filing-1","location":"Item 8: consolidated statements of cash flows, fiscal 2024–2026","excerpt":"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."},{"id":"e16","sourceId":"filing-1","location":"Item 7, MD&A: operating cash flow decline and reacquired receivables","excerpt":"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."},{"id":"e17","sourceId":"filing-1","location":"Financial statement disclosures: limitations of historical parent financing arrangements","excerpt":"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."},{"id":"e18","sourceId":"filing-1","location":"Compensation Discussion and Analysis: actual 2026 incentive calculation exclusions","excerpt":"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."},{"id":"e19","sourceId":"filing-1","location":"Post-spin-off compensation: forfeiture terms for unvested equity awards","excerpt":"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."},{"id":"e20","sourceId":"filing-1","location":"Post-spin-off compensation: change-of-control equity provisions","excerpt":"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."},{"id":"e21","sourceId":"filing-1","location":"Corporate governance: majority-independent board","excerpt":"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."},{"id":"e22","sourceId":"filing-1","location":"Corporate governance: committee risk oversight responsibilities","excerpt":"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."},{"id":"e23","sourceId":"filing-1","location":"Corporate governance: conflict disclosure and recusal requirements","excerpt":"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."},{"id":"e24","sourceId":"filing-1","location":"Item 1A, Risk Factors: provisions discouraging director replacement","excerpt":"These provisions may also prevent or discourage attempts to remove and replace incumbent directors."},{"id":"e25","sourceId":"filing-1","location":"Executive compensation disclosures: June 1, 2026 completion of spin-off","excerpt":"As discussed elsewhere in this Annual Report, on June 1, 2026, we completed the Spin-Off and became an independent, publicly traded company."}],"changes":["Retains the previous narrow verdict and network-based cost-advantage thesis.","Adds explicit customer substitution, smaller-network competition and Amazon's announced offering; named LTL peer coverage remains absent.","Separates the receivables-related cash flow disruption from underlying operating deterioration and adds assessments of disclosed compensation and governance arrangements."],"limitations":["All evidence comes from one issuer filing dated August 5, 2026, with dateKind filed. Operating results cover years ended May 31; they do not establish post-spin-off standalone performance.","The footprint is demonstrated, but comparative unit costs, route density, utilization and replication economics are not quantified. Consolidation benefits relative to truckload do not establish superiority over other LTL networks.","Amazon is explicitly identified through an announced offering. The passages do not name established LTL competitors or demonstrate Amazon's realized competitive impact.","No realized yield, price changes, customer renewal data or customer pricing contracts are supplied. Revenue declines cannot be attributed to pricing alone.","Management ownership and complete standalone incentive targets are missing. Disclosed award terms establish contractual arrangements, not achieved performance, vesting or exceptional alignment.","Risk factors identify potential erosion mechanisms; they are not treated as realized customer losses or pricing reductions."],"qualityAssessments":[{"category":"moat","checks":[{"criterion":"structural_advantage","grade":2,"rationale":"The extensive terminal footprint and consolidation model support a narrow structural cost advantage. Comparative costs against established LTL competitors are missing, and less capital-intensive competing networks limit the inference.","evidenceIds":["e1","e2","e3","e4","e5","e6"]},{"criterion":"durability","grade":2,"rationale":"Almost 60 years of network development and capital-intensive infrastructure support persistence. Demand sensitivity, customer substitution and separation dependencies prevent a strong durability assessment.","evidenceIds":["e2","e5","e9","e11","e12"]},{"criterion":"customer_dependency","grade":1,"rationale":"The network serves customers' supply chains, but disclosed carrier and mode substitution and price sensitivity indicate fragile dependency. No contractual lock-in or demonstrated switching friction is supplied.","evidenceIds":["e2","e9","e13"]},{"criterion":"erosion_resilience","grade":2,"rationale":"The business remained profitable through weaker demand, but operating income declined in both reported comparisons. The 2026 decline remains material even after adding back the disclosed $492 million separation expense; this establishes mixed resilience without proving competitive share loss.","evidenceIds":["e10","e11"]}]},{"category":"pricing_power","checks":[{"criterion":"realized_pricing","grade":null,"rationale":"Revenue and industry pricing sensitivity are disclosed, but price, volume, mix and fuel effects cannot be separated. No observed pricing outcome can be established.","evidenceIds":["e10","e13","e14"]},{"criterion":"retention","grade":null,"rationale":"Ongoing revenue demonstrates demand, but neither repeat-customer behavior nor renewals or switching friction is disclosed. The experienced macroeconomic demand decline does not establish retention deterioration.","evidenceIds":["e9","e10","e11"]},{"criterion":"margin_resilience","grade":1,"rationale":"Operating income fell from $1,753 million in 2024 to $1,404 million in 2025 and $540 million in 2026. Adding back $492 million of 2026 separation costs still leaves substantial deterioration relative to revenue. Profitability persisted, but demonstrated margin protection was weak; the passages do not isolate pricing as the cause.","evidenceIds":["e10"]},{"criterion":"contractual_freedom","grade":null,"rationale":"General LTL pricing drivers do not establish FedEx Freight's contractual rights to reset rates, impose surcharges or change customer terms. Customer contract disclosures are absent.","evidenceIds":["e14"]}]},{"category":"strong_management","checks":[{"criterion":"capital_discipline","grade":2,"rationale":"Operating cash flow substantially exceeded capital expenditures in 2024–2025, and capital spending declined across the reported period. In 2026, cash flow fell, debt issuance reached $4,271 million and transfers to the parent reached $3,910 million. Reacquired receivables explain much of the cash flow disruption. These are mixed actual outcomes, with historical parent financing limiting attribution to standalone management.","evidenceIds":["e15","e16","e17"]},{"criterion":"incentive_alignment","grade":2,"rationale":"Approved equity terms include forfeiture upon most early departures, providing a service-based alignment mechanism. Change-of-control acceleration and exclusion of separation costs from the actual 2026 incentive calculation temper that assessment. Ownership, complete performance targets and realized standalone award outcomes are missing.","evidenceIds":["e18","e19","e20"]},{"criterion":"execution","grade":2,"rationale":"The established network continued producing positive operating income and the spin-off was completed. Earnings deterioration and ongoing transition-service dependencies make execution mixed. This assessment uses indirect operating results rather than verified service-level or standalone transformation achievements.","evidenceIds":["e1","e10","e12","e25"]},{"criterion":"governance","grade":2,"rationale":"A majority-independent board, assigned committee oversight and conflict-recusal requirements are actual disclosed safeguards. Provisions that may discourage director replacement offset these protections, and the newly independent company's governance effectiveness has little demonstrated history.","evidenceIds":["e21","e22","e23","e24","e25"]}]}],"financialAssessments":[],"qualityPolicy":"quality-scores-2","sourcePolicy":"issuer-evidence-4","basisHash":"2345424cbb13bb256a6e94c07ee51a568195593131c62fff28a479bb0c69fdc3","updatedAt":"2026-10-18T14:34:55.324Z","sources":[{"id":"filing-1","url":"https://www.sec.gov/Archives/edgar/data/2082247/000162828026053359/fdxf-20260531.htm","publishedAt":"2026-08-05","sha256":"0f6d4f79cd1dcac08fa75b85e54d6461372cb30038e79a240a9ac4f4a7bc617e","dateKind":"filed"}],"model":"gpt-6.1-sol","providerId":"codex:554ae890ea3708b0b69a69695e81e6017ab4749875345d6c0a2075c89e3e469a","usage":{"input_tokens":40007,"cached_input_tokens":0,"cache_write_input_tokens":0,"output_tokens":3319,"reasoning_output_tokens":158},"basisSupplement":{"previousHash":"1b21953cc8b64f5dd3c9cc90f2c3486caa70a541e2d0c835234a91b3b1894443","checkedAt":"2026-10-18T16:49:32.080Z","rule":"dated historical and missing inputs only; accepted observations and research date retained"}},"signals":[{"period":"2026","end":"2026-05-31","values":{"gross_margin":null,"operating_margin":6.139852188743604,"roic":null,"fcf_margin":-2.410460488914156,"sbc_revenue":0.14781125639567935},"issues":{"peg":"The matching period one year earlier is unavailable.","pfcf":"Trailing free cash flow is zero or negative, so this ratio is undefined.","pfcf_growth":"The matching period one year earlier is unavailable.","pb":"Equity attributable to owners is zero or negative, so this ratio is undefined.","ev_sales":"Cash and cash equivalents is unavailable in the extracted statements for this period.","ev_ebitda":"Cash and cash equivalents is unavailable in the extracted statements for this period.","software_capex":"Separately disclosed software and intangible investment is unavailable in the extracted statements for this period.","sbc_fcf":"Free cash flow before SBC deduction is zero or negative, so this ratio is undefined.","gross_margin":"The reported inputs required for this metric are unavailable in the extracted statements for this period.","roic":"The matching period one year earlier is unavailable.","roce":"The matching period one year earlier is unavailable.","roiic":"The matching period one year earlier is unavailable.","roe":"The matching period one year earlier is unavailable.","roa":"The matching period one year earlier is unavailable.","roic_wacc":"Enter a WACC assumption from 0 to 100%.","cash":"Cash and cash equivalents is unavailable in the extracted statements for this period.","net_debt":"Cash and cash equivalents is unavailable in the extracted statements for this period.","debt_equity":"Equity is zero or negative, so this ratio is undefined.","net_debt_ebitda":"Cash and cash equivalents is unavailable in the extracted statements for this period.","debt_fcf":"Trailing free cash flow is zero or negative, so this ratio is undefined.","dilution":"The matching period one year earlier is unavailable.","buybacks":"The reported inputs required for this metric are unavailable in the extracted statements for this period."}}],"sources":[{"id":"filing-1","url":"https://www.sec.gov/Archives/edgar/data/2082247/000162828026053359/fdxf-20260531.htm","publishedAt":"2026-08-05","sha256":"0f6d4f79cd1dcac08fa75b85e54d6461372cb30038e79a240a9ac4f4a7bc617e","dateKind":"filed"}],"history":[{"version":4,"updatedAt":"2026-10-18T16:49:32.080Z","verdict":"narrow","value":null},{"version":3,"updatedAt":"2026-10-18T16:35:43.872Z","verdict":"narrow","value":null},{"version":2,"updatedAt":"2026-10-18T02:27:49.793Z","verdict":"narrow","value":null},{"version":1,"updatedAt":"2026-10-18T02:18:02.026Z","verdict":null,"value":null}],"hasRequested":false,"requestStatus":"completed","researchIssue":null,"archivedMoat":null,"scope":"supported_catalog"}