FedEx announced FedEx Freight after the stock market closed Thursday.
REUTERS/Ina Fassbender
FedEx will spin off its freight business into a new publicly traded company.
FedEx Freight will separate from FedEx over the next 18 months.
Express delivery services have seen slowing demand for their services.
FedEx is spinning off its freight arm into a new publicly traded company.
Called FedEx Freight, the new company will handle large cargo, while FedEx will continue to handle the parcel shipping business that shoppers might be more familiar with as their holiday packages arrive.
The separation will happen over the next 18 months, FedEx said in a statement on Thursday. Shares of FedEx jumped about 9% in after-hours trading.
"Through this process, we will unlock value for our Freight business and position FedEx to create even greater value for stockholders," CEO Raj Subramaniam said in the statement.
FedEx also cut its profit estimates for its 2025 fiscal year in earnings released on Thursday and cited a "challenging demand environment." It said it had seen lower-than-expected FedEx Freight revenue and profit as "sustained weakness in US industrial production continued to pressure less-than-truckload industry demand."
The spinoff will allow FedEx to focus more on the parcel shipping market, it said in its statement.
Bloomberg reported in October that the company, along with rival UPS, has faced less demand this year for next-day shipping as many customers look to save money with slower options.
Notably, Comcast's NBCUniversal isn't biding all of its cable networks adieu, however. It's hanging onto Bravo, a purveyor of reality-TV shows like the "Real Housewives" series and "Vanderpump Rules."
The logic behind that decision is simple: Bravo's shows are inexpensive and popular, and they perform very well on Peacock, its budding streaming service.
In the deal, Comcast is holding onto Peacock, as well as its broadcast network, NBC. Those platforms are how Comcast distributes its all-important NFL rights, so they were never on the chopping block.
Though it may surprise some, Comcast has determined that Bravo is also too valuable to let go. Ten of the 50 most in-demand TV shows on Peacock this year are from Bravo, noted Brandon Katz, the senior entertainment industry strategist at data firm Parrot Analytics. Parrot's demand metric is based on third-party data, including search results, social-media content, and ratings sites.
"Bravo has a real brand identity that holds value to consumers as opposed to Syfy and USA Network, which have largely pulled back from scripted programming in recent years and are not as recognizable and resonant," Katz wrote, referencing two networks that Comcast is planning to spin off.
Bravo has also served as an anchor for Peacock's expansion into reality-TV originals, which has produced Bravo-style hits like "Love Island USA" and "The Traitors."
Ratings giant Nielsen found this summer that the sixth season of "Love Island USA" was the most-watched reality TV series among streaming originals, as it racked up over a billion minutes viewed and registered in the top-10 rankings for four straight weeks following its debut.
Without Bravo content, Peacock's reality-TV strategy would be left with a huge hole.
"Comcast likely views Bravo as an important piece of its Peacock strategy, with content that is too difficult to separate from the cable network without destroying any value the network might have," wrote Michael Hodel, a communication services analyst at Morningstar.
Why Comcast's spinoff might not pay off
The other reason why Bravo could have been a keeper is that it still generates cash that can help Comcast pay for the NBA broadcast rights it won over the summer.
"Given the cost-cutting that will likely be required to ameliorate the incoming expenses of NBCU's rich NBA deal, keeping that money-making asset in-house makes sense even if it's shrinking year-over-year," Katz wrote.
Still, Comcast's other cable channels likely turned a profit as well. That, plus the fact that those networks could be weaker on their own, has left some analysts stumped as to why this spinoff happened at all — other than to make investors happy.
Wall Street generally hates declining businesses, like the pay-TV networks that Comcast has been saddled with.
"Comcast will now have a cleaner and clearer growth story," analyst Craig Moffett of MoffettNathanson wrote to BI.
However, Moffett said that the spun-off networks likely make more sense with Comcast than on their own. Analyst Rich Greenfield of Lightshed Partners had made a similar point a few weeks ago.
"It will be challenging to separate NBC from the cable nets, especially for carriage negotiations," Moffett wrote.
Brian Wieser, a media and advertising analyst for Madison and Wall, struck a similar tone.
"Unless Comcast has a vision for what it would do with the capital to build up its remaining media business or how it will cause a merger of the business with another company's cable networks, the transaction would be dis-synergistic," Wieser wrote.
Whatever the fate of the spinoff, Comcast clearly sees the value of Bravo's scripted content, compared to the more challenged TV news business. Investors will ultimately judge whether the spinoff was worth it. As of midday Wednesday, they seemed unconvinced, as the company's shares were only up modestly hours after the news broke.
Comcast today announced plans to spin off NBCUniversal cable TV networks such as USA, CNBC, and MSNBC into a new publicly traded company. Comcast is trying to complete the spinoff in one year, effectively unwinding part of the NBCUniversal acquisition it completed in 2011.
The entities in the planned spinoff generated about $7 billion of revenue in the 12 months that ended September 30, 2024, Comcast said. But cable TV channels have become less lucrative in an industry that's shifting to the streaming model, and the spinoff would let Comcast remove those assets from its earnings reports. Comcast's total revenue in the 12-month period was about $123 billion.
Comcast President Mike Cavanagh said in the Q3 earnings call on October 31 that Comcast is "experiencing the effects of the transition in our video businesses and have been studying the best path forward for these assets."
