FedEx taps leaders from within for LTL spinoff, to Wall Street’s dismay

FedEx Corp. has announced some of the new leaders for its less-than-truckload unit that is expected to be spun off into a new publicly traded company by June 2026.

John Smith, who is currently the chief operating officer of Federal Express (U.S. and Canada) will become president and CEO at the nation’s largest LTL carrier, FedEx Freight. Smith logged 25 years of service at FedEx Freight, serving as president and CEO from 2018 until 2021.

Smith will remain in his current role, which oversees leadership at FedEx Freight and the U.S. and Canada ground operations of Federal Express, until the separation occurs.

FedEx Corp. (NYSE: FDX) Vice Chairman Brad Martin will become the chairman of FedEx Freight. Martin is credited with leading the board’s strategic review of separating the LTL unit into a stand-alone business.

Martin is also expected to remain on FedEx’s board following the spinoff.

“I cannot think of two individuals with more knowledge of, or commitment to, the long-term success of the FedEx Freight business than John Smith and Brad Martin,” said FedEx Corp. President and CEO Raj Subramaniam in a Monday news release. “Together they have the track record and expertise to successfully lead this new and exciting chapter for the independent FedEx Freight company.”

The consolidated FedEx enterprise continues to be overhauled through various initiatives that are expected to deliver $4 billion in cost savings. FedEx Freight has been working to improve freight mix, which includes heavier shipment weights and better density across the network. It has also been onboarding sales staff in recent months to drive the changes.

The company tapped Tom Connolly at the end of last year to be vice president of LTL sales. Connolly has been at FedEx for nearly 30 years. 

FedEx has made other recent moves ahead of the spin. It created a separation management office and a transition team. It also completed a $16 billion debt exchange to facilitate the split.

Wall Street analysts, however, said the news may not be well received by investors.

Deutsche Bank’s (NYSE: DB) Richa Harnain acknowledged the success Smith has had at FedEx Freight and at its Express unit but said the move may create a leadership void at the remaining FedEx entity as it is “undergoing the largest transformation of its history with the combination of Express and Ground.”

She also said investors were mostly hoping FedEx would pluck talent away from an established competitor.

“The popular preference we heard among the investment community [was] that FedEx Freight leadership be an experienced executive outside the organization,” Harnain said.

Morgan Stanley’s (NYSE: MS) Ravi Shanker voiced a similar sentiment, saying the move “is more evidence that FDX LTL will be ‘more of the same’ rather than transformational change.”

“We expect FDX stock to come under pressure following the announcement of new leadership at the LTL SpinCo. While announced CEO John Smith has plenty of experience, we believe investors were singularly focused on external leadership (preferably from a market leader like [Old Dominion Freight Line]) as a key catalyst for the spin,” Shanker said in a note to clients. 

FedEx announced in January that its president of LTL at the time, Lance Moll, was retiring after 33 years with the company.

FedEx Freight has approximately 360 terminals generating roughly $9 billion in revenue annually.

Shares of FDX were off 1.9% ahead of the market open on Tuesday.

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