We added FedEx Corporation (FDX) as we believe the separation of FedEx Freight unlocks significant upside potential. As a standalone entity, FedEx Freight can enhance its commercial strategy and improve pricing discipline, which is crucial in the current market. The broader less-than-truckload (LTL) landscape is improving, supported by a recovery in U.S. industrial activity. We view FedEx as a high-quality franchise with structural advantages that can create value through margin expansion and volume growth.

FedEx Corporation was mentioned as one of the largest purchases during the recent quarterly rebalancing, indicating a positive view on its potential within the portfolio. However, no specific arguments or performance metrics were provided to support a bullish or bearish stance on the company.

FedEx was a contributor for the quarter, responding to another quarter of strong execution, particularly in the Federal Express (FEC) segment. This segment experienced volume growth, yield growth, and cost control, leading to meaningful profit growth. FEC achieved its most profitable peak holiday season ever, with margins expanding for a sixth consecutive quarter as more volume flowed through Network 2.0-optimized facilities. The company is also moving towards higher-value B2B verticals. Additionally, FedEx Freight is on track for a spin-off, which is expected to benefit from a recovery in industrial demand as an independent company. The market continues to underappreciate the earnings power of the core parcels business and the value that can be unlocked through the Freight separation.

FedEx (FDX) is one of the largest providers of parcel delivery and freight services globally, whose shares trade below intrinsic value due to transitory headwinds – including unfavorable mix shift and integration challenges – that we expect to resolve as integration improves and new leadership drives cost discipline and shareholder returns. Q1 performance was strong, driven by a well-received Investor Day where management outlined a path to strong earnings growth, margin expansion, and improved free cash flow generation. Our long-term thesis remains intact as FedEx continues to make meaningful progress on its key initiatives.

FedEx Corporation (FDX) was a top contributor following better-than-expected results, driven by disciplined pricing, improved revenue quality, and continued cost reductions. Margins expanded in the Express segment, while domestic volumes remained relatively resilient despite ongoing freight weakness. The company continues to generate strong cash flow and maintain a solid balance sheet, and we remain constructive given improving industry fundamentals supported by capacity rationalization.

FedEx shares advanced as the company executed meaningful cost reductions under its DRIVE program ahead of the planned spin-off of FedEx Freight, which is targeted for completion in June 2026. This strategic move is expected to enhance operational efficiency and unlock value for shareholders. The market is currently underestimating the potential benefits of these initiatives, positioning FedEx for long-term growth and profitability.

FedEx was mentioned as one of the sectors that added the most to the LCV portfolio’s return in the quarter, alongside Generac. However, there is no explicit bullish or bearish argument made regarding FedEx's future performance or valuation.

FedEx is mentioned as one of the sectors that added the most to the LCV portfolio’s return in the quarter, but there is no explicit directional argument made about its future performance or valuation.

We initiated a position in FedEx as the company has materially cut its structural costs and has plans for further cuts, which we think could result in a more efficient and profitable parcel business as volumes recover in the period ahead. FedEx's LTL (less-than-truckload) business is the industry’s largest by revenue and has the second-highest margins. The planned spin-off in June 2026 will provide exposure to a high-quality business positioned for growth as industrial production improves. We believe FedEx shares are currently at a compelling discount to their intrinsic value.

Despite the recent challenging macro environment, we have been pleased to see FedEx's focus on operational improvements. We expect the company’s separation next year of its Freight unit to be a highly impactful event for both value realization and long-term value per share growth at both companies, as their values can sum to over $350 per share.