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THE BATTLE FOR VALUE:

We will produce superior financial returns for our shareowners by providing highvalue 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.

Fedexs roots: YALE UNIVERSITY


Founder Fred Smiths 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


CREATE TRANSFORM INVEST

THE WINNING WAYS OF UPS


CREATE TRANSFORM INVEST

value for our customers through innovation

business model to capitalize new opportunities for growth

for growth, especially in its global portfolio of customer solutions

The firms policy complements its tradition of employee ownership & eliminates the need to hire managers and officers from outside UPS. Majority of the management team have spent their entire careers with UPS.

FDXS BATTLECRY
COMPETE OPERATE MANAGE

FDXS BATTLECRY
COMPETE OPERATE MANAGE

collectively by standing as one brand worldwide and speaking with one voice

independently by focusing on our independent networks to meet distinct customer needs

collaboratively by working together to sustain loyal relationships with our workforce, customers & investors

High-quality service. Reliability. Speed.

1992 FINANCIAL 2003


HIGHLIGHTS

1992-2003: AT A GLANCE
UPS (Average) 6.7% 11.6% 27.5% FDX (Average) 10.6% 10.0% 22.4%

Sales Book Assets Net income before unusual (gain) loss Net Income Operating Income

32.1% 10.0%

26.9% 17.7%

16.00%

14.00%

12.00%

10.00% fedex margin before interest and taxes 8.00% UPS margin before interest and taxes Poly. (fedex margin before interest and taxes) 6.00% Poly. (UPS margin before interest and taxes)

4.00%

2.00%

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

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.

12.00%

10.00%

8.00%

6.00% fedex net profit margin 4.00% UPS net profit margin Poly. (fedex net profit margin) Poly. (UPS net profit margin) 2.00%

0.00% 1992 -2.00% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

-4.00%

PROFITABILITY: RETURN ON ASSETS


UPS 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 Fedexs ROA of 6.07.
16.00%

14.00%

12.00%

10.00% fedex ROA 8.00% UPS ROA Poly. (fedex ROA) 6.00% Poly. (UPS ROA)

4.00%

2.00%

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

PROFITABILITY: RETURN ON EQUITY


UPS, with an average ROE of 19.94% is above FedEx with an average ROE of 9.73%.
35.00%

30.00%

25.00%

20.00%

e
Fedex ROE UPS ROE Poly. (Fedex ROE)

15.00%

10.00%

Poly. (UPS ROE)

5.00%

0.00%

1992
-5.00%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

-10.00%

ACTIVITY RATIO: DAYS RECEIVABLE


From 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.

60

50

40 Fedex average days outstanding 30

UPS average days outstanding


Poly. (Fedex average days outstanding) Poly. (UPS average days outstanding)

20

10

0 1 2 3 4 5 6 7 8 9 10 11 12

ACTIVITY: FIXED ASSET TURNOVER


Fedex 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.
3

2.5

Fedex fixed asset turnover 1.5 UPS fixed asset turnover Poly. (Fedex fixed asset turnover) Poly. (UPS fixed asset turnover) 1

0.5

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

ACTIVITY: TOTAL ASSET TURNOVER RATIO


Fedex outperforms UPS with an average ratio of 1.49 and 1.47, respectively.

2 1.8 1.6 1.4 1.2 Fedex total asset turnover 1 0.8 0.6 UPS total asset turnover Poly. (Fedex total asset turnover)

Poly. (UPS total asset turnover)

0.4
0.2 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

2.5

Fedex current ratio 1.5 UPS current ratio Poly. (Fedex current ratio) Poly. (UPS current ratio) 1

0.5

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

LIQUIDITY: CASH RATIO


UPS has more liquid cash than Fedex. On the average, UPSs 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.
1.6 1.4

1.2

e
Fedex cash ratio UPS cash ratio Poly. (Fedex cash ratio)

0.8

0.6

Poly. (UPS cash ratio)

0.4

0.2

0
1992 -0.2 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

6000

5000

4000

3000 Fedex working capital turnover 2000 UPS working capital turnover Poly. (Fedex working capital turnover) Poly. (UPS working capital turnover) 1000

0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 -1000

-2000

HEAD TO HEAD: STOCK PERFORMANCE


Stock Price Growth Rate EPS Growth Rate P/E Growth Rate UPS 34.53 31% 1.42 31% 24.81 47% FDX 31.85 22% 1.52 22% 21.65 -1%

U.S. & China


June 18, 2004

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 Chinas domestic and international market. Two of the largest predicted beneficiaries of this agreement were FedEx Corporation and United Parcel Service, Inc. and investors confidence in the opportunity could be seen through their stock prices in 2004.

2004 air transportation agreement

Which company was better positioned to attract the capital necessary to win this competitive battle?

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.

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.

2004 FINANCIAL 2012


HIGHLIGHTS

2.50

2.00

1.50 Current Ratio (FDX)

Current Ratio (UPS)


Poly. (Current Ratio (FDX)) 1.00 Poly. (Current Ratio (UPS))

0.50

LIQUIDITY: QUICK RATIO


FedExs JIT system does not leave room for high inventory levels.

2.50

2.00

1.50 Quick Ratio (FDX) Quick Ratio (UPS) Poly. (Quick Ratio (FDX)) 1.00

Poly. (Quick Ratio (UPS))

0.50

1 2 3 4 5 6 7 8 9

ACTIVITY RATIO: DAYS RECEIVABLE


UPS, although the market leader, has only recently improved collection efficiency. A companys cash position has impact on market perceptions of its stock price.

60.00

50.00

40.00

Days Receivable (FDX) 30.00

Days Receivable (UPS)


Poly. (Days Receivable (FDX)) Poly. (Days Receivable (UPS))

20.00

10.00

PROFITABILITY: RETURN ON ASSETS


UPS 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%.
14.0%

12.0%

10.0%

8.0%

ROA (FDX) ROA (UPS)

6.0%

Poly. (ROA (FDX)) Poly. (ROA (UPS))

4.0%

2.0%

0.0%

PROFITABILITY: RETURN ON EQUITY


UPS 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.
60.0%

50.0%

40.0%

ROE (FDX) 30.0% ROE (UPS) Poly. (ROE (FDX)) Poly. (ROE (UPS)) 20.0%

10.0%

0.0% 1 2 3 4 5 6 7 8 9

1.80

1.60

1.40

1.20

1.00

Debt Equity Ratio (FDX)

Debt Equity Ratio (UPS)


0.80 Poly. (Debt Equity Ratio (FDX)) Poly. (Debt Equity Ratio (UPS)) 0.60

0.40

0.20

STOCK PERFORMANCE: DIVIDEND PAYOUT RATIO


4.50
4.00

3.50

3.00

2.50 Dividend Payout Ratio (FDX) 2.00 Dividend Payout Ratio (UPS) Poly. (Dividend Payout Ratio (FDX))

Poly. (Dividend Payout Ratio (UPS))


1.50

1.00

0.50

1 (0.50) 2 3 4 5 6 7 8 9

STOCK PERFORMANCE
120.00 Market Price (FDX) 100.00 Market Price (UPS) Poly. (Market Price (FDX)) Poly. (Market Price (UPS))

80.00

60.00

40.00

20.00

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 Scorecard

How do the two companies measure up?

1 3

Financially, UPS is the clear winner.

The FedEx brand gives the company leverage as the top of mind in the package delivery industry.

Fedex is a business built on data the right information at the right time when customers contact Fedex.

Fedex likes to INNOVATE.

STILL WINS

FedEx vs. UPS


Group Members:
Christian Castillo Francis Maneja Anna Santos Josephine Teves