The U.S. Postal Service is asking for an average 5.4% increase for its express-shipping products in its proposed 2020 price increases submitted Wednesday. That is a bit of good news for parcel shippers such as United Parcel Service and FedEx, which might cheer the tailwind to industry pricing.
J.P. Morgan, however, thinks investors should keep higher pricing in perspective. “We expect a muted reaction from [the parcel shippers],” analyst Brian Ossenbeck wrote in a Thursday research report, saying that price increases “weren’t another step-change like 2019.”
The increase is healthy, but lags behind last year’s request of about 7.3%, according to data from Stamps.com (ticker: STMP).
Investors in transportation & logistic stocks have been more focused of late on the post office because of a recent development that allows it to charge higher prices for international shipping. That could create a situation in which a rising tide lifts all boats. Keep in mind that the post office is a significant competitor of United Parcel Service (UPS) and FedEx (FDX). In fact, all three entities have about $70 billion in annual sales.
Why FedEx and UPS Could Benefit From the Post Office’s Pension Problem