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FedEx Raises Rates for Freight

Zacks Equity Research

Leading freight forwarding company, FedEx Corp. (FDX) announced increase in shipping rates by an average of 3.9% in FedEx Freight segment. The new rates will be effective from Mar 31, 2014. 

The new rates will levy on FedEx Freight shipments within the U.S., including Alaska, Hawaii, Puerto Rico and the U.S. Virgin Islands. Shipments between U.S. and Canada, within Canada, between U.S. and Mexico and within Mexico will also be charged as per the new rates.

FedEx remains successful in implementing higher shipping rates, which are imperative to revenue growth. Previously, the company provided rate hikes for 2014, including a 3.9% hike in shipping rates at FedEx Express for U.S. export and import services, with effect from Jan 6, 2014.

In Dec 2013, the company also hiked shipping rates for FedEx Ground and FedEx Home Delivery by 4.9% effective Jan 6, 2014. The company also hinted at increasing FedEx SmartPost rates in the near future.

In 2013, the company also introduced “FedEx One Rate” – a flat rate shipping system for individual shippers and small business entities. The company’s new rate option is available on Express packages and is backed by the FedEx Express money back guarantee.

We expect these initiatives to substantially better the company’s earnings power over the next several years and provide an edge over its peers like United Parcel Service, Inc. (UPS), Radiant Logistics, Inc. (RLGT) and Expeditors International of Washington Inc. (EXPD).

In addition, FedEx foresees modest growth in the global economy, driven by gradual improvements in Europe and China. Based on this, the company remains positive over growth in real GDP, industrial production, and consumer spending in calendar year 2014 and 2015 in the U.S. and globally.

FedEx foresees global GDP growth of 2.8% and 3.2% for calendar year 2014 and 2015, respectively. FedEx also assumes U.S. GDP growth of 2.4% for calendar year 2014 and 3.0% for 2015. Further, industrial production growth is estimated at 3.1% and 3.6% in calendar years 2014 and 2015, respectively. The company is also banking on new business.

Currently, FedEx has a Zacks Rank #3 (Hold).

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