The Battle for Value 2004

Competitive Strategies

• Inventor of the “HUB”

system

• “absolutely positively

overnight” ad campaign.

• Expanding services,

acquiring more trucks and

aircrafts.

• Raising capital

• “People-Service-Profit”

philosophy

• JIT system

• Technological Innovations

• Expanded package-delivery

to every address in the U.S.

• Half-priced over-night letters

• Aggressive Acquisitions

• Large investment:

- Technology

- Aircrafts

- Facilities

Factors

(+) Innovated

(+) Purchased Own Planes

(+) Largely free of Unions

(-) Initially too Aggressive in

Expansion

(+) Superior Financial Returns

(+) Conducive Work Climate

(+) Expressed Delivery Leader

(-) Short-term goal oriented

(-) Quality Problems

(-) Union Strikes

(-) Slow and Plodding

(+) Financial Conservative

(+) Long-term Goals

(-) Late Overnight Market Entry

• US & China Air Transportation Agreement

• Airline & trucking deregulation

ROA

2003

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 the recent years

ROE

2003

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 the recent years

WACC

WACC

A company’s 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

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 year

MVAMarket Value Added:

The higher the MVA, the better. A high MVA indicates the company has created

substantial wealth for the shareholders. A negative MVA means that the value of

management's actions and investments are less than the value of the capital contributed

to the company by the capital market (or that wealth and value have been destroyed)

Formula: MVA = company’s mkt value – invested capital

UPS gain higher MVA in recent year so UPS management can create value to the

company more than Fedex

Net profit Margin

2003

Net Profit margin

a measure of profitability. A low profit margin indicates a low

margin of safety: higher risk that a decline in sales will erase

profits and result in a net loss, or a negative margin. Profit

margin is an indicator of a company's pricing strategies and

how well it controls costs

Formulas

Net Profit Margin = Net Profit / Revenue

UPS have lower net profit margin so better cost controlling

Stock Price,Dec 31

The price of stock of UPS higher than FedEx.

The value of the company also reflect in the price of stock which come from the

performance of the company,.

Dividends per share

Dividend Per Share

Dividends are a form of profit distribution to the shareholder. Having

a growing dividend per share can be a sign that the company's

management believes that the growth can be sustained.

Formula

Dividend Per Share = Dividend / No. of Shares

Dividend per share of UPS higher than FedEx with growing rate.

Annual Return

FedEx 20.25% 87.73% 46.93% 88.04% 157.06% 214.72% 438.04% 248.47% 292.64% 429.57% 528.02%

UPS 12.16% 27.03% 41.89% 58.11% 66.22% 116.22% 646.95% 535.14% 489.19% 581.95% 705.95%

Standard&Poor's 500 Index 7.06% 5.41% 41.36% 70.01% 122.72% 182.12% 237.21% 203.02% 163.50% 101.93% 155.20%

Both FedEx and UPS have annual return higher than Standard and Poor’s 500

index but UPS have higher annual return compare to FedEx in recent years.

Company of Excellence

Due to given financial data, UPS tend to have better performance than

FedEx in these following instruments.

• Return on Assets

• Return on Equity

• WACC

• Economic Value Added

• Market Value Added

• Net Profit Margin

All these 6 ratios analysis show the

effectiveness of management in create

the value to the company which will be

shown on Stock Price, Dividend per share

and Annual Return. Dividend depend on

Revenue which show the performance

of company,