US Postal Service price hikes could cost Amazon $1B, firm says
The U.S. Postal Service’s proposed price hikes for certain delivery options could cost Amazon more than $1 billion in 2019, but the e-commerce giant’s outlook looks strong, according to one Wall Street firm.
Earlier this month, the U.S. Postal Service proposed increases of roughly 9 percent to 12 percent on shipments using its Parcel Select service. Amazon relies heavily on the federal institution to fulfill the final leg of its deliveries to customers. If approved, the changes would take effect in 2019.
“We arrive at a potential incremental shipping expense range of $400 million to $1.1 billion range with the assumption that 40-50 percent of U.S. packages are shipped via USPS,” Credit Suisse analysts wrote in an Oct. 22 research note.
A U.S. Postal Service representative told FOX Business earlier this month that the rate hikes were designed to “keep the Postal Service competitive.” President Trump has repeatedly criticized Amazon’s relationship with the USPS, arguing the e-commerce giant has taken advantage of the service.
Credit Suisse lowered its earnings-per-share estimate for Amazon to $34.99 from $43.11 based on shipping expenses and the company’s plan to hike minimum wages for roughly 350,000 employees. Despite the increase in shipping costs, Credit Suisse reiterated its “Outperform” rating for the company’s stock and raised its price target to $2,400 from $2,100.
The firm estimates that Amazon’s minimum wage hike will cost the company an additional $300 million in the fourth quarter and $1.1 billion in fiscal 2019.
Amazon will report third-quarter earnings after the bell on Thursday.
