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Why Stock Just Popped 10%

By Rich Smith - Dec 6, 2018 at 2:50PM

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USPS is contemplating reforms … that don't appear to threaten at all.

What happened

All of last year, (STMP) was dogged by investor worries: Would the company become collateral damage in President Trump's ongoing feud with Jeff Bezos, the owner of The Washington Post and founder and CEO of (AMZN 0.25%)?

Today, stock is soaring -- 10.4% as of 1:45 p.m. EST -- as investors believe they have gotten their answer: a (qualified and preliminary) "no."

A display of small-denomination postage stamps from different countries, honoring famous landmarks

Who would have guessed that investing in "Stamps" could be so exciting? Image source: Getty Images.

So what

On Wednesday, the U.S. Department of the Treasury released its long-awaited "Task Force report on the United States Postal System" containing suggested reforms. (The reaction is only happening today because Wednesday was a market holiday).

Within this report, the Treasury recommends several actions aimed at correcting the Post Office's "unsustainable financial path which poses significant financial risk to American taxpayers" -- and a total of $69 billion in accumulated losses over the period from 2007 to 2018. These actions include such inoffensive measures as improving "governance," defining "essential postal services," and modernizing the Post Office's "cost allocation methodology."

They include actions of more concern to shippers that use the Post Office for delivering packages -- such as Amazon: "Developing a new pricing model that removes price caps and charges market-based prices" could raise those companies' costs.

Now what

The Treasury's Task Force report does not, however, appear to include any recommendations that seem clearly aimed at hurting's business -- with the possible exception of a vague recommendation to "pursue cost-cutting strategies." (Potentially that could affect, if one strategy pursued is to cut the amount that takes when it sells postage online.)

Aside from that unhappy outcome, though: If USPS ends up raising prices on postal shipments, then any percentage that takes for selling postage on those packages could increase in terms of dollar value to Between that prospect, and the lack of any clear and present danger to the business in the task force's report, I'd say investors are right to be happy today.

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