FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) may see more of their customers shipping through the United States Postal Service (USPS) after both companies hike their rates and introduce dimensional charging, Morgan Brennan says in a report on CNBC.
According to Brennan, now that the holidays are over, FedEx Corporation (NYSE:FDX) has followed United Parcel Service, Inc. (NYSE:UPS)’s lead and increased rates by 5%. UPS recently increased its rates by 4.9%.
Furthermore, both FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) have introduced new ways of calculating the charge for a shipment, introducing dimensional pricing.
“Both carriers are now charging by size as well as weight and that’s on all ground shipments. That’s the big change to focus on. [It] directly targets e-tailers’ bulky lightweight packages that take up a lot of space but haven’t until now cost a lot to ship,” Brennan said.
For example, under the new formulas of FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS), a 17-inch square box weighing 3 pounds will be billed as if it is 30 pounds in the old schedule of fees for both logistics companies.
According to Brennan, these new charges will mean more revenue for both the companies. Couple this with the fact that fuel has decreased in price and the change means better top line for the companies which should also translate to bottom line growth.
Nonetheless, people will feel the brunt of the price increase and new charging structure which is why Brennan suggests that the USPS which has not increase its prices or introduced dimensional pricing may get more shipments as people move to a more economical method of shipping.
Mason Hawkins’ Southeastern Asset Management owned about 9.38 million FedEx Corporation (NYSE:FDX) shares by the end of the third quarter. Also by the end of the same period, Edgar Wachenheim’s Greenhaven Associates owned about 5.12 million United Parcel Service, Inc. (NYSE:UPS) shares.