Leading freight carrier, FedEx Corporation (FDX - Analyst Report) announced that it is offering flat rate shipping to individual shippers and small business entities. The company’s new flat rate option is available on Express packages and is backed by the FedEx Express money back guarantee.
The FedEx One Rate price will be based on the type of packaging, selected service and distance. Given a predictable pricing model, the company believes customers can efficiently manage their shipping cost through a simplified one rate that offers time-definite delivery and value-added services.
The market reacted positively to the news and stock prices closed $1.19, up 0.7% from its opening on Monday, Oct 21, trading.
Apart from the flat shipping rate strategy that is aimed at attracting customers, FedEx remains successful in implementing higher shipping rates, which are imperative for revenue growth. Recently, 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.
The company also indicated that it will provide information on rate hikes at FedEx Ground and FedEx SmartPost later this year. We expect these initiatives to substantially better the company’s earnings power over the next several years.
Further, FedEx has spread itsservices across the U.S., Canada and Mexico to capitalize on business opportunities in NAFTA (North American Free Trade agreement) markets. The company is mounting its Priority next-day services in its FedEx Freight segment by opening a new service centre in Rochester, New York and has also begun less-than-truckload (LTL) services to and from Canada. The new service centre will cater to 13 U.S. and Canadian markets dealing in cross border shipments to and from Toronto and Montreal.
In Mexico, the company added two new service centers – one each in Culiacán and Silao. These centers will strengthen its freight network in northwestern and north central part of Mexico. In April, the company, through its Trade Networks unit, announced expansion service capabilities in Latin America through various strategic operational developments such as the opening of new offices in Brazil and Mexico.
Further, the company also formed strategic alliances with Portlink Logística Multimodal Ltda, one of the largest freight forwarders in southern Brazil to intensify its reach in the Brazilian market.
Overall, through its Trade Networks division, FedEx remains successful in establishing relationships and extending capabilities to 19 countries across Latin America. These initiatives enable the company to strengthen its international business and provide opportunities to offset lower demand trends in its domestic market.
FedEx, which operates with United Parcel Service, Inc. (UPS - Analyst Report) and Radiant Logistics, Inc. (RLGT - Snapshot Report) and Expeditors International of Washington Inc. (EXPD - Analyst Report) has a Zacks Rank #3 (Hold).