FedEx Trims Earnings Outlook and Announces Shipping Rate Increases For 2016

FedEx Trims Earnings Outlook and Announces Shipping Rate Increases For 2016

FedEx Corp. recently announced that FedEx Express will raise rates by an average of 4.9% for U.S. domestic, export and import services. Additionally, FedEx Ground will increase the surcharges for unauthorized shipments that exceed the published maximum dimensions, effective November 2nd. This is a result of online retailers increasingly shipping large packages that present nuanced and costly challenges for operations.

Following a failure to meet Wall Street expectations for its latest quarter, FedEx also cut its earnings outlook for the year. The company attributed this move to weaker demand for its LTL freight services, increased costs in its Ground division and higher insurance costs. FedEx reportedly expects adjusted earnings of $10.40 to $10.90 a share for the year, down from its previous estimation of $10.60 to $11.10 a share.

Companies should be aware of the fact that FedEx’s report of a 4.9% average increase on Express shipping does not mean a 4.9% increases all the way across the board. Average increases are misleading in this sense – standard overnight rates could increase nearly 6% in 2016, and 2day and express saver rates could in fact rise over 7%. FedEx is expected to further elaborate on the specifics of their rate increases in the next few weeks, and this information is important to keep in mind, as it will certainly inform which of the company’s services you choose to utilize.

To avoid unnecessary surcharges from FedEx Ground starting this November, it’s important to evaluate the packages you are shipping and determine if they fall under what FedEx deems oversize or unauthorized, and there is an important distinction between the two. Packages that weigh 150 lbs. or less and exceed 108 inches in length or 130 inches in length and girth are considered oversize packages. Oversize packages are rated based on the greater of the package’s actual rounded weight or dimensional weight, and come with a charge of $67.50 per oversize package. Unauthorized packages are those that exceed 119 inches in length or 165 inches in length and girth, and it’s at FedEx’s discretion whether to ship them or not. These come with a hefty $110 charge per applicable package.

Missing quarterly earnings expectations and reducing outlooks for the coming year hardly puts FedEx in an ideal position, so you can certainly expect the company to hand out as many surcharges as they can get away with. What should be your plan moving forward? Consolidation. Intelligent Audit will help you make sense of FedEx’s overarching rate increases to ensure you don’t fall into the trap of paying surcharges and fees that could have been avoided. We’ll also help formulate strategies that will make your products more shippable under FedEx’s new parameters.

Contact Intelligent Audit today to get to leverage our industry expertise and plan your company’s response to FedEx’s rate increases.

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