Despite competition from Amazon.com, the package delivery giants are increasing prices. Here’s a look at why — and what it means for investors.
Prices are going up. Around the time of the company’s first-quarter 2017 results in late September, FedEx Corporation (NYSE:FDX) followed rival United Parcel Service, Inc (NYSE:UPS) in hiking selected shipping rates by 4.9% — a rate far in excess of inflation. What’s going on? What does it mean for investors in both stocks? And what can customers expect from pricing in the future?
Why prices are going up
The pricing increases will grab the headlines, but in reality they are part of a series of actions both companies have been taking to maximize profitability. In short, FedEx and UPS need to take these measures because they are seeing margin pressure as a result of burgeoning e-commerce delivery growth. That pressure shows up in different ways.
Clearly, hiking prices will help both companies increase yield rate growth in the future. In short, both companies are trying to maximize profitability rather than just chase volume growth and fight off Amazon.
Looking ahead
For consumers, it’s obviously not good news to see higher rates. However, for investors, it’s good news. The evidence is that UPS and FedEx have struggled to deal with managing profitability in the face of strong e-commerce delivery growth. The measures taken are in response to the pressures that both these huge companies are feeling on their profit margins. Given the strength of e-commerce delivery demand, seems likely that these costs will be more than accepted by the consumer – which is fantastic news for investors.
UPS to raise rates 4.9% this month and after Christmas
FedEx to Increase Shipping Rates after holidays for Express, Ground and Freight Services
Trump is to UPS/FDX as Clinton is to the Post Office! Fear of Loss as Opposed to the Opportunity To Gain! The Choice is Quite Clear!
Good! will get a bigger % raise in my UPS and FDX stock than the crummy 1% from this Dinosaur. I look around at our dirty, old, dilapidated plant and old, broken down equipment and rotting, rusty, fleet……and wonder where all the money goes? bonus money for the corrupt po mismanagement who lose $Billions? remember UPS and FDX both have 600-700 modern aircraft they must buy/lease, maintain and staff with real professional pilots who make over 175K ( no stupid po nepotism mismgt inbreed dolts need apply) as well as a complete ground fleet and staff. I can see where the money goes at UPS and FDX…..US Postal Circus not so much! its just a contrast in capitalism vs marxism. don’t have to tell you who I am voting for President!
That’s why we need a strong public Postal Service, so that delivering to America is about pleasing all Americans, not just shareholders.
Having a strong Public Postal Service is a honorable idea. If you look
at the media. You will see more horror stories, than not. I need no one
to tell me how it is done, because I have done it for several decades. It
is really simple, Put the public first, put your name on the line. and if you
are to to win, hope you are not alone.