fedex ups case study

7/26/2019 FedEx UPS Case Study

1/31

The Battle for Value, 2004:FedEx Corp. vs. The United Parel

!ervie, "n.

#ohd $sraf Bin $%d &aha% '()*)4+-

$%dirah/an asin #oha/ed '()420*-2

1ursahiirah Binti #oha/ad $riffin '()42)2++

U//u Fathiah Binti #a/ad '()4)334+

(roup 3: Case !tud Presentation

F"1 +2+*: Finanial !tate/ent $nalsis

eturer: 5r. 6a/dino 6a/dan

)0th#arh 20)+

#ohd $sraf Bin $%d &aha% '()*)4+-

$%dirah/an asin #oha/ed '()420*-2

1ursahiirah Binti #oha/ad $riffin '()42)2++

U//u Fathiah Binti #a/ad '()4)334+

(roup 3: Case !tud Presentation

F"1 +2+*: Finanial !tate/ent $nalsis

eturer: 5r. 6a/dino 6a/dan

)0th#arh 20)+


2/31

Presentation 7utline

1) Company History

2) FedEx and UPS Company Analysis

3) China Breakthrouh and European !arket

") Competition in Express#$eli%ery !arket

&) Capital expenditure') (atio Analysis

) Company o* +ur Choi,e

2


3/31

) FedEx 6istor

-dea *rom Fred !/ith.s underraduate term paper *or /ale Uni%ersity

e,onomi, ,lass 01'2#1'')

-nstead o* usin ,aro spa,e on passener airlines Fred anted topurhase planes and utili4e hu5#and#spoke distri5ution pattern

-n )-8) ith 94million inheritan,e and 9-) million %enture ,apital FederalExpress Corporation as *ounded

+nly in 1' start makin 6738' million pro*it

71 5illion re%enue 5y 193 7228& 5illion in 2::38

3


4/31

) UP! 6istor

Founded in )-085y i/ Case in Seattle ;ashinton

-nitially as a %ile;/essen


5/31

) =e fats on %oth o/panies

&

2003 FedEx UP!


6/31

2 !&7T $nalsis on FedEx

'

!trenetrea,hed /aturit


7/31

2 !&7T $nalsis on UP!

!tren


8/31

3 FedEx vs. UP!, ?ho is the ?innerA

9

0.90

0.95

1.00

1.05

1.10

1.15

1.20

1.25

UPS FedEx and SGP &:: Pri,e Patterns # une 2::3 to une 2::"

Index (18-Jun-03 1.00)

US#China 5ein air#transportationareement neotiation

,hanesFedEx I 61'83

UPS I 638:

SGP &:: I 6:83


9/31

3 Co/petition in China

FedEx UP!

11 eekly *lihts to China ' eekly *lihts

Fle dire,tly to BeiJin Shanhai andShen4hen

Fle dire,tly to BeiJin and Shanhai

Ser%in 22: Chinese ,ities Ser%in 2:: ,ities

&: roth in %olume 5eteen 2::3 #2::"

': roth on its US @ Shanhai tra**i,5eteen 2::1#2::"

un 2::" @ US sins ith China air#transportation areement

). )-* ne? ?ee>l fli


10/31

3 The European #ar>et UP! lar


11/31

3 Devenue in 5o/esti vs. "nternational #ar>et

11

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20030%

20%

40%

60%

80%

100%FedEx and UPS Revenue ! "a#$e

FedEx U.S. d&'e* FedEx Ine#na&na+

UPS U.S. d&'e* UPS Ine#na&na+

UPS o* international re%enueis


12/31

4 Co/petition in Express;5eliver #ar>et

12

&ei


13/31

4 Co/petition in Express;5eliver #ar>et 'ont

3. 7perational en


14/31

4 UP! 5"$5s over the ears

1"


15/31

* Capital Expenditure as a result of intense o/petition%et?een the t?o o/panies

1&

? Beteen 12 @ 2::3 FedEx and UPS /athed eah others invest/entsin ,apital almost exa,tly8

? Capex rose at annuali4ed rate o* 34.+4G0FedEx)and 3+.8G0UP!)


16/31

+ Datio $nalsis ; 1et Profit #ar


17/31

D7$

1

Deturn on $ssetsDhe hiher the return the 5etter the pro*it per*orman,e *or the ,ompanyFor/ula:>et -n,ome N 0Fixed Assets 6 >et ;orkin Capital)

UPS ain hiher (+A in re,ent years

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

FedEx 1.6% 4.4% 6.5% 7.1% 6.8% 6.5% 6.9% 7.3% 7.3% 5.7% 6.4% 6.3%

UPS 6.5% 9.1% 9.1% 9.2% 8.7% 7.2% 11.7% 4.9% 14.6% 10.7% 12.7% 10.4%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20030%

2%

4%

6%

8%

10%

12%

14%

16%

FedEx UPS

UPS2FedEx:


18/31

D7E

19

Deturn on eHuit!easures the rate o* return on the onership interest o* the ,ommon sto,k oners8 -tmeasures a *irmMs e**i,ien,y at eneratin pro*its *rom e%ery unit o* shareholdersM eKuity8(+E shos ho ell a ,ompany uses in%estment *unds to enerate earnins rothD7E at )*G;20G onsidered as


19/31

!ales (ro?th

1

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20030%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

FedEx UPS

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

CAGR(92-03)

FedEx 3.42% 8.60%10.76

% 9.39%12.13

%37.79

% 5.67% 8.84% 7.52% 4.98% 9.12%11.53%

UPS 7.65%10.08

% 7.51% 6.29% 0.40%10.37

% 9.13%10.05

% 2.94% 2.04% 7.08% 7.32%

Althouh UPS re%enue is 18& times larer than FedEx FedEx re%enue roth is5etter than UPS

FedEx ha%e hiher lon term sales roth at 118& %s8 UPS.s 83

UPS3FedEx1

UPS "


20/31

&$CC

2:

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 20038%

9%

10%

11%

12%

13%

14%

15%

FedEx 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%

&$CCA ,ompany.s assets are *inan,ed 5y either de5t or eKuity as an in,rease in ;ACCnotes a de,rease in %aluation and a hiher risk8

For/ula;ACC I Od01#t) x $N0$6E)Q 6 Oe x EN0$6E)Q

UPS ain loer ;ACC in the re,ent years

UPS"FedEx1

UPS &


21/31

EV$ '$nnual

21

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003-,400-,200

,0

,200

,400

,600

,800

,1000

,1200

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 ,1195

Eono/i Value $ddedA measure o* a ,ompanyMs *inan,ial per*orman,e 5ased on the residual ealth,al,ulated 5y dedu,tin ,ost o* ,apital *rom its operatin pro*it 0adJusted *or taxes on a,ash 5asis)8 0Also re*erred to as Re,onomi, pro*itR8)For/ulaE=A I >et +peratin Pro*it A*ter Daxes 0>+PAD) # 0Capital Cost o* Capital)

UPS ain hiher E=A in re,ent years

UPS&FedEx1

UPS '


22/31

#V$

22

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003,0

,10000

,20000

,30000

,40000

,50000

,60000,70000

,80000

FedEx UPS

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

FedEx ,625 ,1011 ,2350 ,1117 ,1783 ,3056 ,5492,1167

0 ,5313 ,5993 ,9542,1181

6

UPS ,7287 ,8090 ,8983 ,9812,10772 ,11195 ,14723 ,71064 ,56928 ,50820 ,58384 ,69315

#ar>et Value $dded:Dhe hiher the !=A the 5etter8 A hih !=A indi,ates the ,ompany has ,reatedsu5stantial ealth *or the shareholders8 A neati%e !=A means that the %alue o*

manaementMs a,tions and in%estments are less than the %alue o* the ,apital ,ontri5utedto the ,ompany 5y the ,apital market 0or that ealth and %alue ha%e 5een destroyed)For/ula: !=A I ,ompany.s market %alue @ in%ested ,apital

UPS ain hiher !=A in re,ent year so UPS manaement ,an ,reate %alue to the,ompany more than Fedex

UPS'FedEx1

UPS


23/31

!to> Prie, 5e 3)st

23

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003,0.00

,10.00

,20.00

,30.00

,40.00

,50.00

,60.00

,70.00

,80.00

FedEx UPS

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

FedEx,10.1

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

Earlier slide shos FedEx outper*ormed UPS o%er 2::3#2::" period 0on China nes)

5ut o%er 1#2::3 UPS sto,k pri,es are ,onsistently hiher than FedEx8

Dhe %alue o* the ,ompany are also re*le,ted in the sto,k pri,es8

UPSFedEx1

UPS 9


24/31

5ividend per share

2"

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003,0.00

,0.20

,0.40

,0.60

,0.80

,1.00

,1.20

,1.40

,1.60

,1.80

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

5ividend Per !hare$i%idends are a *orm o* pro*it distri5ution to the shareholder8 Ha%in aroin di%idend per share ,an 5e a sin that the ,ompanyMs manaement

5elie%es that the roth ,an 5e sustained8For/ula$i%idend Per Share I $i%idend N >o8 o* Shares

$i%idend per share o* UPS hiher than FedEx ith roin rate8

UPS9FedEx1

UPS 9


25/31

PE

2&

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

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003-10.0

10.0

30.0

50.0

70.0

90.0

110.0

130.0

150.0

FedEx UPS

PE DatioDhe pri,e#earnins ratio 0PNE (atio) is the ratio *or %aluin a ,ompany thatmeasures its ,urrent share pri,e relati%e to its per#share earnins8 oer PNE

means under%alue ,ompany or the ,ompany is doin ex,eptionally ellrelati%e to its past trendsFor/ulaPNE I !arket =alue per Share N Earnins per Share

FedEx PNE is 5etter than UPS sin,e 1

UPS9FedEx2

UPS


26/31

Cu/ulative Co/pound $nnual Deturn

2'

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

0%

100%

200%

300%

400%

500%

600%

700%

800%

FedEx UPS S/P 500 Index

Both FedEx and UPS ha%e annual return hiher than Standard and Poor.s &:: index 5utUPS ha%e hiher annual return ,ompare to FedEx in re,ent years8

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

FedEx 20% 88% 47% 88% 157% 215% 438% 248% 293% 430% 528%

UPS 12% 27% 42% 58% 66% 116% 646% 535% 489% 582% 706%

S&P

500 7% 5% 41% 70% 123% 182% 237% 203% 164% 102% 155%

UPSFedEx2


27/31

8 Co/pan of Choie UP!I

+%erall UPS has superior *inan,ial ratios hiher di%idend and is

relati%ely sta5le and trusted ,ompany *or years8 (eturn on Assets

(eturn on EKuity

;ACC

E,onomi, =alue Added

!arket =alue Added

>et Pro*it !arin

$i%idend

2

Dhe *irst ' ratios sho the effetivenessof /ana


28/31

#ornin


29/31

Bonus: $tual share pries sine 2004: FedExsurprisin


30/31

!o/e possi%le explanations

FedEx has %etter EP! o%er the years due to loer num5er o* sharesoutstandinT

FedEx has hiher per,ei%ed roth %ia ,onsistent inrease in its revenues

FedEx ratin


31/31

Than> ou and JK$

31

fedex ups case study

Documents