Professional Documents
Culture Documents
Presentation Outline
1) Company History
2) FedEx and UPS Company Analysis
3) China Breakthrough and European Market
4) Competition in Express-Delivery Market
5) Capital expenditure
6) Ratio Analysis
7) Company of Our Choice
1) FedEx History
Idea from Fred Smiths undergraduate term paper for Yale University
economic class (1962-1966)
In 1971, with $4 million inheritance and $91 million venture capital, Federal
Express Corporation was founded
1) UPS History
FedEx
UPS
50,000
88,000
625
583
Employee
216,500
360,000
Asset
$15.4 bn
$28.9 bn
Revenue
$22.5 bn
$33.4 bn
Net Income
$830 mn
$2.9 bn
Ground Vehicles
Aircraft
Weaknesses
Opportunities
Threats
Weaknesses
Opportunities
Threats
1.20
1.15
1.10
Index1.05
(18-Jun-03 1.00)
1.00
% changes:
FedEx = +16.3%
UPS = +3.0%
S&P 500 = +0.3%
0.95
0.90
3) Competition in China
FedEx
UPS
6 weekly flights
10
FedEx % of international
revenue is going down
40%
20%
0%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx U.S. domestic
UPS U.S. domestic
11
FedEx International
UPS International
Mode of Delivery
Time
Air
Overnight
Ground
2-day (deferred
delivery)
3-day
4 day (regular delivery)
1. Customer Focus
Both companies offer customized solutions rather than standardized products
2. Price competition
UPS cut FedEx overnight letter price by half when first entered the market
12
5. Service Expansion
FedEx offers volume discount at superb quality
UPS added more drop-off boxes and began Saturday pickups
6. Logistic Services
Total solutions - Order entry, warehousing, inventory accounting and account
receivable.
FedEx serves Laura Ashley, UPS manages Dell and Amazon
13
14
Between 1992 2003, FedEx and UPS matched each others investments
in capital almost exactly.
Capex rose at annualized rate of 34.64% (FedEx) and 36.78% (UPS)
15
UPS 1
FedEx 0
FedEx
UPS
1993
1994
1995
1996
2002
2003
FedEx
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
-1.5% 0.7% 2.4% 3.2% 3.0% 3.1% 3.2% 3.8% 3.8% 3.0% 3.5%
3.1% 4.6% 4.8% 5.0% 5.1% 4.1% 7.0% 3.3% 9.9% 7.8% 10.2%
2003
3.7%
8.7%
16
1997
1998
1999
2000
2001
UPS 2
FedEx 0
ROA
Return on Assets
The higher the return the better the profit performance for the company
Formula:
Net Income / (Fixed Assets + Net Working Capital)
UPS gain higher ROA in recent years
16%
14%
12%
10%
8%
6%
4%
2%
0%
1992
1993
1994
1995
1996
1997
FedEx
FedEx
UPS
1998
1999
2000
2001
2002
2003
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
1.6% 4.4% 6.5% 7.1% 6.8% 6.5% 6.9% 7.3% 7.3% 5.7% 6.4% 6.3%
6.5% 9.1% 9.1% 9.2% 8.7% 7.2% 11.7% 4.9% 14.6% 10.7% 12.7% 10.4%
17
UPS 3
FedEx 0
ROE
Return on equity
Measures the rate of return on the ownership interest of the common stock owners. It
measures a firm's efficiency at generating profits from every unit of shareholders' equity.
ROE shows how well a company uses investment funds to generate earnings growth
ROE at 15%-20% considered as good.
UPS gain better ROE in recent years
35%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
1992
FedEx
UPS
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
FedEx
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
-7.2% 3.2% 10.6% 13.3% 12.0% 12.2% 12.7% 13.5% 14.4% 9.9% 10.9% 11.4%
13.9% 20.5% 20.3% 20.3% 19.4% 14.9% 24.3% 7.1% 30.1% 23.4% 25.6% 19.5%
18
UPS 3
FedEx 1
Sales Growth
Although UPS revenue is 1.5 times larger than FedEx, FedEx revenue growth is
better than UPS
FedEx have higher long term sales growth at 11.5% vs. UPSs 7.3%
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
1993
1994
1995
1996
1997
1998
FedEx
FedEx
UPS
1999
2000
2001
2002
2003
UPS
CAGR
(921998 1999 2000 2001 2002 2003 03)
37.79
% 5.67% 8.84% 7.52% 4.98% 9.12% 11.53%
10.37
10.05
% 9.13%
% 2.94% 2.04% 7.08% 7.32%
UPS 4
FedEx 1
WACC
WACC
A companys assets are financed by either debt or equity, as an increase in WACC
notes a decrease in valuation and a higher risk.
Formula
WACC = [Kd(1-t) x D/(D+E)] + [Ke x E/(D+E)]
UPS gain lower WACC in the recent years
15%
14%
13%
12%
11%
10%
9%
8%
1992
1993
1994
1995
1996
1997
FedEx
1998
1999
2000
2001
2002
2003
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx 11.0% 9.7% 11.6% 11.2% 12.6% 12.6% 12.1% 11.6% 11.8% 11.4% 11.5% 10.4%
UPS
14.2% 12.6% 13.3% 12.7% 12.5% 12.1% 11.3% 12.0% 12.1% 11.2% 10.6% 9.0%
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UPS 5
FedEx 1
EVA (Annual)
Economic Value Added:
A measure of a company's financial performance based on the residual wealth
calculated by deducting cost of capital from its operating profit (adjusted for taxes on a
cash basis). (Also referred to as "economic profit".)
Formula
EVA = Net Operating Profit After Taxes (NOPAT) - (Capital * Cost of Capital)
UPS gain higher EVA in recent years
$1,200
$1,000
$800
$600
$400
$200
$0
-$200
-$400
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx ($261) ($246) ($154) ($115) ($219) ($215) ($102) ($190) ($151) ($396) ($373) $170
UPS
($70) ($17) ($158) $217
$74 ($138) $405 $949 $881 $599 $392 $1,195
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UPS 6
FedEx 1
MVA
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
FedEx
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$11,67
$11,81
FedEx $625 $1,011 $2,350 $1,117 $1,783 $3,056 $5,492
0 $5,313 $5,993 $9,542
6
$10,77 $11,19 $14,72 $71,06 $56,92 $50,82 $58,38 $69,31
UPS $7,287 $8,090 $8,983 $9,81222
2
5
3
4
8
0
4
5
UPS 7
FedEx 1
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
$10.1
FedEx
9 $12.25 $19.13 $14.97 $19.16 $26.19 $32.06 $54.81 $35.50 $40.00 $53.95 $63.98
UPS $9.25 $10.38 $11.75 $13.13 $14.63 $15.38 $20.00 $69.00 $58.75 $54.50 $63.08 $74.55
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UPS 8
FedEx 1
Dividend per share of UPS higher than FedEx with growing rate.
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx
UPS
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.20
UPS $0.25 $0.25 $0.28 $0.32 $0.34 $0.35 $0.22 $0.58 $0.68 $0.76 $0.76 $0.92
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UPS 8
FedEx 2
P/E
130.0
P/E Ratio
The price-earnings ratio (P/E Ratio) is the ratio for valuing a company that
measures its current share price relative to its per-share earnings. Lower P/E
means undervalue company or the company is doing exceptionally well
relative to its past trends
Formula
P/E = Market Value per Share / Earnings per Share
110.0
150.0
90.0
70.0
50.0
30.0
10.0
1993
-10.0
1994
1995
1996
1997
FedEx
1998
1999
2000
2001
2002
2003
UPS
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
FedEx
50 20.96 11.36 14.22 16.79 18.7 25.73 15.04 19.8 22.67 22.93
UPS 14.82 14.42 14.34 14.55 18.64 12.58 87.34 23.13 25.59 22.21 29.01
25
UPS 9
FedEx 2
Both FedEx and UPS have annual return higher than Standard and Poors 500 index but
UPS
have higher annual return compare to FedEx in recent years.
800%
700%
600%
500%
400%
300%
200%
100%
0%
1993
1994
1995
1996
FedEx
1993
FedEx
20%
UPS
12%
S&P
500
7%
1997
1998
UPS
1999
2000
2001
2002
2003
1994
88%
27%
1995
47%
42%
1996
88%
58%
1997
157%
66%
1998
215%
116%
1999
438%
646%
2000
248%
535%
2001
293%
489%
2002
430%
582%
2003
528%
706%
5%
41%
70%
123%
182%
237%
203%
164%
102%
155%
26
27
FedEx: Only 3
green bars
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Source: Morningstar.com
5 March 2016
2.00
1.50
Index
(18-Jun-04 1.00)
1.00
0.50
0.00
FedEX
29
UPS
S&P 500
FedEx has better EPS over the years due to lower number of shares
outstanding
FedEx has higher perceived growth via consistent increase in its revenues
FedEx rating was upgraded to BBB+ from BBB in 2012. UPS is already at
AAA.
FedEx has wider presence in China compared to UPS
FedEx big acquisition of TNT Express NV announced in April 2015 was
viewed positively for its future earnings
Slump in crude oil prices (FedEx has bigger air fleet than UPS), and
lower pension expenses improved FedEx quarterly performance
On a side note, FedEx sponsors UEFA Europa League, tennis ATP World
Tour and major golf tournament (hence superior publicity than UPS)
The bottom line: It depends. If you want a quick and higher beta stock, then
FedEx is the stock for you. But if youre looking for a solid, long-term
investment, then UPS is the way to go.
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