Global delivery service provider FedEx Corporation (FDX) announced a hike in its shipping rates for ground and home delivery. The company increased rates by an average of 4.9% to be effective from January 7, 2013.
The average rates of FedEx Ground and FedEx Home Delivery will go up by 5.9%. However, the 1% drop in fuel surcharge will mitigate the effects to some extent. The rates of FedEx SmartPost are also expected to change.
In September, the company raised its shipping rates for FedEx Express by an average of 3.9% for U.S. domestic, U.S. export and U.S. import services. These changes will also be implemented from January 7, 2013.
Recently, the leading cargo carrier United Parcel Service Inc. (UPS) introduced new service rates for 2013 that will be effective from December 31, 2012. The new rates will reflect a 4.5% hike for all UPS Air and U.S. origin international services. Further, the UPS Ground services will now be costlier by 4.9%.
Memphis, Tennessee based FedEx provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively under the FedEx brand. The company operates through four major segments — FedEx Express, FedEx Ground, FedEx Freight and FedEx Services.
We believe that FedEx is well positioned to reap benefits from improved pricing, volume growth, continued yield improvement and diminishing cost headwinds. Strong performances at FedEx Ground and FedEx Freight are also expected to support earnings growth.
However, margin level of the Express segment is expected to remain subdued due to the demand shift from premium to deferred products given economic volatilities. We further remain cautious on the company’s expansion strategy in Europe given the continent’s current economic backdrop.
FedEx currently retains a Zacks #3 Rank, reflecting a Hold rating for the short term (1-3 months).
FEDEX CORP (FDX): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis Report
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