If you find yourself paying more for package and business-related deliveries next month, don't shoot the carrier pigeon.
You won't feel the pinch at the post office. The $0.37 first-class postage stamp should be good for another four years. But with businesses and online retailers demanding speedy delivery service, someone has to bear the brunt of the new rates once any guaranteed contracts phase out. Guess who?
While the new rates sound fair and modest, the delivery companies are approaching accessorial fees with a much broader markup brush. Both Airborne and FedEx will raise Saturday pickup and delivery surcharges by 25% to $12.50.
Because all three have hiked fees at the same time, customers have little choice but to accept the changes. That might make for a more rosy 2003 than analysts have been bargaining for. Right now, UPS, FedEx, and Airborne are trading at next year's earnings multiples of 27, 17, and 24, respectively. While that may not seem cheap, more factors than just the new rates are working in their favor. If consumer confidence continues to improve, corporate demand will create more business for messengers. And if online retailing continues to grow, that's a welcome heavier load of parcels to deliver.
As a consumer, just be grateful that the higher rates won't go into effect until after the holiday rush. As an investor, now might be a good time to camp out on your front porch to see if these companies deliver on the bottom line. They should. The fundamentals look strong, and neither rain, nor hail, nor sleet, nor snow should keep these three companies from their routes next year.