FedEx Corp said on Friday it will increase rates for express delivery unit FedEx Express by 3.5 percent, effective January 1, 2007. FedEx shares rose more than 1 percent in early trade.
The Memphis, Tennessee-based package delivery company said it will raise its standard list rate by 5.5 percent, but the effect of the increase will be offset by a 2 percentage point reduction in its fuel surcharge. FedEx introduced an identical rate increase a year ago for calendar year 2006.
"FedEx's 3.5 percent effective list rate increase at its flagship Express division is a good sign that domestic parcel pricing remains firm and rational," Morgan Stanley analyst William Greene wrote in a research note. Morgan Stanley has an "overweight" rating on FedEx with a target price of $135.
Greene added that FedEx's move indicates that the company expects its main rival, Atlanta-based United Parcel Service Inc, will follow suit a similar price increase.
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