fedex ups uap

THE BATTLE

FOR VALUE:

We will produce superior financial

returns for our shareowners by providing high-

value added logistics,

transportation and related business services through

focused operating companies.

“

”

We seek to grow our global business by

serving the logistics needs of customers,

offering excellence and value in all that we do; maintain a financially strong company that provides a long-term

competitive return to our shareowners.

“

”

Fedex’s roots: YALE UNIVERSITY

Founder Fred Smith’s undergraduate paper in Economics

From Bikes to Big Brown: The UPS Story

Jim Casey built the largest delivery service company from a couple of bikes in Seattle to shipping packages via commercial passenger planes.

Market Disruption: FDX Style

Market Disruption: FDX Style

THE WINNING WAYS OF UPS

INVESTTRANSFORMCREATE

THE WINNING WAYS OF UPS

INVESTTRANSFORMCREATE

for growth,

especially in its

global portfolio of

customer solutions

business model to

capitalize new

opportunities for

growth

value for our

customers through

innovation

have spent their entire careers with UPS.Majority of the management team

and officers from outside UPS.the need to hire managers

ownership & eliminatestradition of employee

complements its

Thefirm’s policy

FDX’S BATTLECRY

MANAGEOPERATECOMPETE

FDX’S BATTLECRY

MANAGEOPERATECOMPETE

collaboratively by

working together to

sustain loyal

relationships with

our workforce,

customers &

investors

independently by

focusing on our

independent

networks to meet

distinct customer

needs

collectively by

standing as one

brand worldwide

and speaking with

one voice

High-quality service. Reliability. Speed.

1992

2003

FINANCIAL

HIGHLIGHTS

1992-2003: AT A GLANCE

UPS

(Average)

FDX

(Average)

Sales 6.7% 10.6%

Book Assets 11.6% 10.0%

Net income

before unusual

(gain) loss

27.5% 22.4%

Net Income 32.1% 26.9%

Operating Income 10.0% 17.7%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

fedex margin before interest and taxes

UPS margin before interest and taxes

Poly. (fedex margin before interest and taxes)

Poly. (UPS margin before interest and taxes)

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

fedex net profit margin

UPS net profit margin

Poly. (fedex net profit margin)

Poly. (UPS net profit margin)

PROFITABILITY: NET PROFIT MARGIN

On the average Fedex has a net profit margin of

2.64% while UPS has 6.12% During this period, UPS

proves to have an increasing net profit margin

compared with Fedex.

PROFITABILITY: RETURN ON ASSETSUPS has been generating earnings from its assets more than Fedex. On the average, from

1992 to 2003, UPS has an ROA of 9.57%. this is fifty percent bigger than Fedex’s ROA of

6.07.

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

fedex ROA

UPS ROA

Poly. (fedex ROA)

Poly. (UPS ROA)

e

PROFITABILITY: RETURN ON EQUITYUPS, with an average ROE of 19.94% is above FedEx with an average ROE of 9.73%.

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex ROE

UPS ROE

Poly. (Fedex ROE)

Poly. (UPS ROE)

ACTIVITY RATIO: DAYS RECEIVABLEFrom 1992 to 2003, Fedex was able to maintain low

days sales outstanding. On the other hand, UPS days

sales outstanding have been increasing in time. This

means that Fedex, relative to UPS, is more efficient

in collecting its accounts receivable.

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 10 11 12

Fedex average days outstanding

UPS average days outstanding

Poly. (Fedex average days outstanding)

Poly. (UPS average days outstanding)

ACTIVITY: FIXED ASSET TURNOVERFedex proves to be more effective in using its investments in fixed assets to generate

revenues. On the average, Fedex has a fixed asset turnover ratio of 2.48. On the other hand,

UPS has a fixed asset turnover ratio of 2.35.

0

0.5

1

1.5

2

2.5

3

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex fixed asset turnover

UPS fixed asset turnover

Poly. (Fedex fixed asset turnover)

Poly. (UPS fixed asset turnover)

ACTIVITY: TOTAL ASSET TURNOVER RATIOFedex outperforms UPS with an average ratio of 1.49 and 1.47, respectively.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex total asset turnover

UPS total asset turnover

Poly. (Fedex total asset turnover)

Poly. (UPS total asset turnover)

0

0.5

1

1.5

2

2.5

3

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex current ratio

UPS current ratio

Poly. (Fedex current ratio)

Poly. (UPS current ratio)

e

LIQUIDITY: CASH RATIOUPS has more liquid cash than Fedex. On the average, UPS’s cash and cash

equivalents can cover almost 40% of its short-term debt. . Fedex, on the other hand

can cover 11% of its short-term liabilities.

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex cash ratio

UPS cash ratio

Poly. (Fedex cash ratio)

Poly. (UPS cash ratio)

-2000

-1000

0

1000

2000

3000

4000

5000

6000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Fedex working capital turnover

UPS working capital turnover

Poly. (Fedex working capital turnover)

Poly. (UPS working capital turnover)

HEAD TO HEAD: STOCK PERFORMANCE

UPS FDX

Stock Price 34.53 31.85

Growth Rate 31% 22%

EPS 1.42 1.52

Growth Rate 31% 22%

P/E 24.81 21.65

Growth Rate 47% -1%

2004 air transportation

agreement

June 18,

2004

U.S. &

China

reached an air-transportation agreement that impacted the global air-cargo market by allowing an increase in the number of flights between the two nations. This would impact many companies around the world due to the predicted future growth of China’s domestic and international market. Two of the largest predicted beneficiaries of this agreement were FedEx Corporation and United Parcel Service, Inc. and investor’s confidence in the opportunity could be seen through their stock prices in 2004.

Which company

was better

positioned to

attract the capital

necessary to win

this competitive

battle?

On the other hand, Fedex has proven itself to be more efficient in its operations compared with UPS. This is

supported by its activity ratios, which is far superior than UPS. Due to these facts, Fedex displays future growth potential.

From 1992- 2003, UPS ratios proved that it is more profitable and more liquid than FedEx. Their superiority in managing profits and liquidity have translated to higher and faster growing stock price, EPS, and P/E ratio compared with FedEx.

2004

2012

FINANCIAL

HIGHLIGHTS

-

0.50

1.00

1.50

2.00

2.50

1 2 3 4 5 6 7 8 9

Current Ratio (FDX)

Current Ratio (UPS)

Poly. (Current Ratio (FDX))

Poly. (Current Ratio (UPS))

-

0.50

1.00

1.50

2.00

2.50

1 2 3 4 5 6 7 8 9

Quick Ratio (FDX)

Quick Ratio (UPS)

Poly. (Quick Ratio (FDX))

Poly. (Quick Ratio (UPS))

LIQUIDITY: QUICK RATIOFedEx’s JIT system does not leave room for high inventory levels.

-

10.00

20.00

30.00

40.00

50.00

60.00

1 2 3 4 5 6 7 8 9

Days Receivable (FDX)

Days Receivable (UPS)

Poly. (Days Receivable (FDX))

Poly. (Days Receivable (UPS))

ACTIVITY RATIO: DAYS RECEIVABLEUPS, although the market leader, has only recently

improved collection efficiency. A company’s cash

position has impact on market perceptions of its

stock price.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

1 2 3 4 5 6 7 8 9

ROA (FDX)

ROA (UPS)

Poly. (ROA (FDX))

Poly. (ROA (UPS))

PROFITABILITY: RETURN ON ASSETSUPS dedication to long-term return is evident in its ROA and ROE, as UPS

clearly outstripped FedEx in both. UPS’ ROA averaged 0.6% growth over

the past 9 years, while FedEx’ ROA averaged a decline of 1%.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

1 2 3 4 5 6 7 8 9

ROE (FDX)

ROE (UPS)

Poly. (ROE (FDX))

Poly. (ROE (UPS))

PROFITABILITY: RETURN ON EQUITYUPS was the runaway winner in terms of ROE, averaging 36% growth

over the last 9 years versus an average decline of 1.4% for FedEx.

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

1 2 3 4 5 6 7 8 9

Debt Equity Ratio (FDX)

Debt Equity Ratio (UPS)

Poly. (Debt Equity Ratio (FDX))

Poly. (Debt Equity Ratio (UPS))

(0.50)

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

1 2 3 4 5 6 7 8 9

Dividend Payout Ratio (FDX)

Dividend Payout Ratio (UPS)

Poly. (Dividend Payout Ratio (FDX))

Poly. (Dividend Payout Ratio (UPS))

STOCK PERFORMANCE: DIVIDEND PAYOUT RATIO

-

20.00

40.00

60.00

80.00

100.00

120.00

1 2 3 4 5 6 7 8 9

Market Price (FDX)

Market Price (UPS)

Poly. (Market Price (FDX))

Poly. (Market Price (UPS))

STOCK PERFORMANCE

2004-2012: AT A GLANCE

% Growth: UPS, FDX, S&P 500(2000 – 2012)

FDX UPS S&P

% Growth: UPS, FDX, S&P 500(2000 – 2012)

FDX UPS S&P

% Growth: UPS, FDX, S&P 500(2000 – 2012)

FDX UPS S&P

% Growth: UPS, FDX, S&P 500(2000 – 2012)

FDX UPS S&P

Which company

is better

positioned to

attract the capital

necessary to win

this competitive

battle?

The Balance ScorecardHow do the two companies measure up?

1Financially,

UPS is the clear

winner. 2The FedEx brand gives the

company leverage as the top of

mind in the package delivery

industry.

3Fedex is a business built on

data – the right information

at the right time when

customers contact Fedex.4 Fedex likes to

INNOVATE.

STILL WINS

FedEx vs. UPS Group Members:

Christian Castillo

Francis Maneja

Anna Santos

Josephine Teves