kevin kennedy latin american economist ryan snyder...
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School of BusinessInvestment Program
Sophie Forstein Operations ManagerLuke Fox Private Equity AnalystRyan Snyder Quantitative Model DeveloperKevin Kennedy Latin American Economist October 18, 2018
School of BusinessInvestment Program
Investment Thesis
Company Overview and History
Company Strategy
Corporate Governance
Competitive Landscape
SWOT Analysis
Financial Highlights
Valuation Overview
Sector Overview and Outlook
Portfolio Analytics and Allocation
Ratio Analysis Recommendation
FedEx CorporationTable of Contents
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Company1. Developed domestic network paired with
international exposure through recent acquisitions
2. Variable cost structure for competitive positioning
3. Investment in technology and automation
Macro 1. Increasing e-commerce environment2. Global GDP increase driving parcel delivery
necessity
Investment ThesisFedEx Corporation
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Corporate StructureFedEx Corporation
Images and information pulled from FedEx company website
Revenue Breakdown
Company Structure
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Company HistoryFedEx Corporation
Information from FedEx financial timeline on company website
1977 19791971
198319851989
1996 20012002 - 2016
Foundation Public Law 95-163
COSMOS
RPS Inc.
$1 Billion
China/U.S.
FTL
USPS Expansion
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Critical Recent AcquisitionsFedEx Corporation
Information from FedEx Corporate website
2016
2017 2018
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Data obtained from FedEx Corporate website & annual reports as well as UPS annual reports
Company StrategyFedEx Corporation
Take advantage of variable cost structure to control OPEX and improve margins
Invest in technology to improve synergies and streamline operations
Develop and integrate global networks inherited from recent acquisitions
Salaries as % OpEx
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Corporate GovernanceFedEx Corporation
Data obtained from FDX Company Executives page
Frederick W. Smith Chairman & Chief Executive
Officer● Responsible for strategic
corporate direction for all segments of FDX corp
● Founded FDX in 1971 and active proponent of regulatory reform in parcel delivery industry
Brian J. Bronczek President & Chief Operations
Officer● Oversees FDX corp’s sales and
marketing and holds co-CEO in FDX Services segment
● Joined FDX in 1976 as an hourly delivery driver
Alan B. Graf Jr. Executive VP & Chief Financial
Officer● Oversees all aspects of FDX
corp’s global financial functions● Joined FDX in 1980 and served
as a senior Financial Analyst then CFO of FDX Express before his promotion
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● DHL leads international market share, FedEx is stronger in US
● FedEx has higher express revenue, UPS has larger ground revenue
● Ground revenue market share has increased for 19 consecutive years
Competitive LandscapeFedEx Corporation
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● Focused on time sensitivity versus total package volume
● Leader in freight
● Most automated centers in the country
● Soon all ground workers will be employed through ISP model
● Potential future threats from last mile delivery services
Competitive LandscapeFedEx Corporation
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Competitor Price PerformanceFedEx Corporation
Bloomberg
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Technical AnalysisFedEx Corporation
Charts published by TradingView
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Technical AnalysisFedEx Corporation
Charts published by TradingView
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Data from Bloomberg
Ratio AnalysisFedEx Corporation
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Data and graphs obtained from Accenture and Technavio
Sector OutlookFedEx Corporation
● Lack of infrastructure and technology are causing lags
● Last-mile delivery is the key for companies in the CEP industry right now
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● Massive global presence
● Strong history of acquisitions
● EarthSmart initiative
● Good work environment
Strengths
● Competition
● Claim policies
● Highly U.S. dependent
● Market share growth
Weaknesses
● New Aircrafts
● Blockchain
● AI in distribution centers
● Last mile delivery expansion
Opportunities
● Tariffs threaten growth
● Rising oil prices
● Seasonality
Threats
SWOT AnalysisFedEx Corporation
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Data obtained from Fedex Copr. Annual Report
Financial HighlightsFedEx Corporation
Revenue Breakdown03 ● Domestic revenues double international ● Express accounts for more than half of all revenues
Margins02● Gross margin of 71.3%● Operating Margin of 7.2% and ROI of 9.6%● Thin but worth it for future growth
Short-term Debt Coverage01
● Roughly $3.2 billion in cash● Current liabilities total $9.6 billion● Debt-Coverage ratio of 8.8
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Target prices derived by a 2 year estimate, 5 year projection DCF model. Detailed valuation inputs found in appendix.
AssumptionsFedEx Corporation
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Valuation OverviewFedEx Corporation
Target prices derived by a 2 year estimate, 5 year projection DCF model.
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Target prices derived by a 2 year estimate, 5 year projection DCF model.
Scenario AnalysisFedEx Corporation
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Analyst OpinionsFedEx Corporation
wsj.com
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Valuation OverviewFedEx Corporation
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Portfolio Analytics and AllocationFedEx Corporation
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RecommendationFedEx Corporation
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RecommendationFedEx Corporation
Recommendation: purchase 50 shares at a price of ~$217 for a total of ~$10,850
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Investment Thesis:In a global market plagued with uncertainty, 3M is a company that focuses on the fundamentals in order to return value to its shareholders. The company has managed to increase its dividend for the past 60 years as a result of its competitive strategy that integrates diversification and innovation. Many of their products perform as staples, which will carry them through times of economic contraction, while investment in the automated car industryprovides a significant growth opportunity.
3MSell 55 shares of MMM at $202.93
Date 10/18/2018
Current Price $202.93 (-13.64%)
Purchase Price $234.97
Market Cap $119.042B ($137B)
Beta 1.18 (0.97)
Sector/Industry Industrials
Target Price $260.40
P/E TTM 28.08 (29.03)
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Thank you for your time. We would like to invite questions.
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Appendix
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Competitive AnalysisFedEx Corporation
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Financial HighlightsFedEx Corporation
2018- Potential indicator of a slowing economy
2016 - All stocks tumble after 1 year of climbing prices
2015- Fedex missed earnings twice; blamed it on macroeconomic trend; however UPS was still able to exceed expectations
2011- “Black Monday” stock market falls
2008- significant decline caused by the market crash
For the most part, these transportation stocks are affected by macro trends in the economy
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1
Balance Sheet
FedEx Corporation
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1
Income Statement
FedEx Corporation
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1
Statement of Cash Flows
FedEx Corporation
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1
Data pulled from CSI Markets
3M Company Revenue Growth