fedex ups uap
TRANSCRIPT
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THE BATTLE
FOR VALUE:
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We will produce superior financial
returns for our shareowners by providing high-
value added logistics,
transportation and related business services through
focused operating companies.
“
”
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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.
“
”
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Fedex’s roots: YALE UNIVERSITY
Founder Fred Smith’s undergraduate paper in Economics
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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.
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Market Disruption: FDX Style
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Market Disruption: FDX Style
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THE WINNING WAYS OF UPS
INVESTTRANSFORMCREATE
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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
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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
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FDX’S BATTLECRY
MANAGEOPERATECOMPETE
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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
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High-quality service. Reliability. Speed.
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1992
2003
FINANCIAL
HIGHLIGHTS
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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%
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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)
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-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.
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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)
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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)
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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)
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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)
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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)
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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)
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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)
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-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)
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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%
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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.
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Which company
was better
positioned to
attract the capital
necessary to win
this competitive
battle?
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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.
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2004
2012
FINANCIAL
HIGHLIGHTS
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-
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))
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-
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.
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-
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.
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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%.
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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.
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-
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))
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(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
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-
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
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2004-2012: AT A GLANCE
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% Growth: UPS, FDX, S&P 500(2000 – 2012)
FDX UPS S&P
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% Growth: UPS, FDX, S&P 500(2000 – 2012)
FDX UPS S&P
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% Growth: UPS, FDX, S&P 500(2000 – 2012)
FDX UPS S&P
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% Growth: UPS, FDX, S&P 500(2000 – 2012)
FDX UPS S&P
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Which company
is better
positioned to
attract the capital
necessary to win
this competitive
battle?
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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.
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STILL WINS
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FedEx vs. UPS Group Members:
Christian Castillo
Francis Maneja
Anna Santos
Josephine Teves