FedEx Wins New 7-Year Contract With USPS

It outbid rival UPS to extend its current deal

   

fedex_trucks_plane_logos_630_flickrFedEx (NYSE:FDX) will continue to carry Express Mail and Priority Mail for the United States Postal Service.

The company has won a $10.5 billion contract to extend the service for seven more years. It’s current contract expires this fall, Bloomberg notes.

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However, the new deal may not be a sweet as its former arrangement. According to one estimate, FedEx received $1.6 billion from the Postal Service last year. FedEx did not reveal the exact terms of the new contract, but the term and price suggests that it will get $100 million a year less going forward.

The reduced price likely resulted from FedEx outbidding rival shipping service UPS (NYSE:UPS), which announced last year that it planned to bid aggressively for the contract. UPS is estimated to have generated just $126.4 million from Postal Service contracts last year.

Last year, the Postal Service lost almost $16 billion. The service is looking to pare services and close low-traffic post offices to cut costs.

Shares of FedEx climbed almost 2% in Wednesday morning trading, while UPS dipped slightly.


Article printed from InvestorPlace Media, http://investorplace.com/2013/04/fedex-wins-new-7-year-contract-with-usps/.

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