Companies and Brands

Postage Hike Savings Die Saturday, Stamps.com, UPS and FedEx Mirror

If prices of goods or services are rising or falling, it often means that someone is winning and someone is losing as a result. As a general service reminder, and hopefully a money-saving reminder, Saturday is the last day to buy postage stamps from the US Postal Service before the price hike takes effect on January 26, 2014. Despite some shipping sector concerns, this does act as a base rate hike for all shipping providers – 3 of which are public companies.

First Class Mail Forever Stamps will be $0.49, versus $0.46 ahead of the price hike. First Class Mail International Global Forever stamps will be $1.15, up from $1.10 ahead of the price hike. This means hopefully that the USPS will lose less money in 2014 than it did in prior years. Still, that is on a “hopefully” status.

Then there is that lucky or unlucky outcome of price hikes. The public will pay more for stamps, making you and me the losers in this. The question to ask is whether or not Stamps.com Inc. (NASDAQ: STMP) just get a built-in revenue booster per customer on a static basis?

The online and customizable postage service provider has a market capitalization rate of $627 million, and the $38.96 price (after a 0.2% gain on a really bad market day) compares to a 52-week range of $22.35 to $49.40. The consensus price target of the three recognized analysts that follow this small stock is $49.75, but the median price target is lower at $47.25.

Where this gets interesting is that the earnings per share estimates for 2014 have only risen to $2.48 per share from $2.46 per share in the last month. And the sales growth for 2013, expected to be 11.8% to $129.3 million, is expected to be 9.7% to $141.79 in 2014. The company serves close to 500,000 customers and it has already released its 2014 USPS Postage Rate Increase Guide.

Stamps.com also made the reminder that United Parcel Service (NYSE: UPS) and FedEx Corp. (NYSE: FDX) are raising ground shipping rates by an average of 4.9% for 2014. A look at the UPS site shows that its price hikes became effective December 30, 2013. After its Christmas rush earnings disclosure took away some of the gusto of the bulls, the 4.9% average hike for UPS shown on its UPS Ground and UPS Air and international services may matter. The actual effective dates were listed as January 23, 2014 on the 2014 rate page. Analysts are calling for a 5% revenue gain in 2014 for UPS, versus what is now only a 2.9% revenue hike in 2013.

FedEx updated its 2014 shipping rate changes on January 6, 2014. FedEx showed that the FedEx Express package and freight rates increased an average of 3.9% for U.S., U.S. export and U.S. import services on its 2014 rates page. The consensus estimates from Wall Street analysts show a 5.2% revenue hike in 2014 (actually May-2015) versus 3% for the current year ending in May-2014.

So the question to ask is whether UPS and FedEx are expected to get their magic sales growth from the economic growth or the price hikes. The reality is that it looks like both UPS and FedEx are getting that expected revenue growth largely from the price hikes and partially from economic growth. Stamps.com is expected to have decelerating revenue growth, but that growth has to be partly from postage and rate hikes.

As a reminder, pre-purchasing 100 basic first class stamps on Saturday is a savings of $3.00 versus Sunday or thereafter. For businesses which send thousands of letters per month, the savings will be even better to have purchased the “Forever” stamps.

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