Tomahawk, WI 09/17/2014 (Basicsmedia) – FedEx Corporation (NYSE:FDX) has announced plans to increase its shipping rates as of the start of next year, according to CNBC’s Dominic Chu. The increase in rates is expected to bolster the company’s earnings.
The increase in rates by 4.9% is expected to affect goods being transported in the U.S., Canada and Mexico starting January. The new shipping rates are expected to give more weight on dimensions of goods mostly light-weight shipping packages.
“FedEx […] is announcing it is going to raise shipping rates but after the holiday season. The shipper is going to raise rates on it’s express; it’s ground also freight services, by an average of around 4.9%. Again starting on January 5th of 2015,” said Mr. Chu.
FedEx stock was surging in the market by 0.84% on announcing it will be passing additional costs to consumers. The increase in rates is also expected to affect FedEx Corporation (NYSE:FDX)’s SmartPost that normally uses the U.S Postal services to deliver goods to consumers. FedEx is set to report its first quarter results today awaiting to see its estimates for the second quarter and full year at the back of an increase in shipping rates.
The increase in shipping rates by FedEx Corporation (NYSE:FDX) come on the heels of rival United Parcel Service, Inc. (NYSE:UPS) also raising rates by 4.4% earlier in the year. The increase is slightly higher compared to last year where the second largest shipping company in the U.S increased rates by 4.5%. The freight segment remains the core business for FedEx as it contributes up to 12% of the total revenue.
The freight segment is also the most competitive than ground and express businesses as it has more players resulting in increased competition. FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) remain the two biggest players on the ground and express businesses meaning they only compete against each other. Increase in prices for the Freight segment has thus been’ hampered by the fact that some competitors may look to gain an advantage in the industry by offering discounted prices.