The Battle For Value, 2004: Fedex Corp. VS. United Parcel Service, Inc. Presented by Group 4 吳政達 106363009 楊原閔 106363092 李宥慈 106363083 陳鴻 106363109 王志坤 106363091 陳威岷 106363105

Brief Summary UPS FedEx Founded in 1907, the largest package-delivery company in the world. success but big bureaucratic, plodding image IPO, 1999 Major investment in technology, planes, quality, and service innovation. UPS 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 founded in 1971, a rising star in the air-cargo industry innovative, and operational leader focused on the purchase of airplanes, the distribution innovation, and customer relationship management FedEx 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 2

Competition in China 5 Competition during 1992-2003 the competition between UPS and FedEx became aggressively fierce Respective large investment Warzone: customer, price, operational reengineering, IT, service expansion China package-delivery market 2004, US and China air-transportation agreement Hub establishment and landing rights. 1 5 30% Largest economy 5 times the volume 30% growth rate 3

Impact of the competition between the two Raise in investment exp. expand service & develop I.T. higher market value & investment FedEx: acquired trucks & aircrafts USP: aware of its weakness Oversea hubs and air fleets Services provided in China Websites launched Provided quicker and more convenient service to match each other Earn profit by eliminate unnecessary steps and costs Provided total inventory control Continue to grow (FedEx 10% annual sales growth) Increase of stock price and market value Investors willing to invest due to growing stock price & EPS Good ROE & ROA 4

Sales Growth of the two FedEx UPS 92-93 93-94 94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 Sales Growth 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% 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 5

Which Firm is doing better? ROE UPS was doing better than FedEx on the ROE (19.94% > 9.73%) Generate more profit with the money shareholders have invested Maybe it is because UPS raised money from debt rather than shareholder’s money. ADD YOUR TITLE HERE ADD ADD YOUR TITLE HERE ADD ROE 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 average FedEx -7.20% 3.22% 10.62% 13.25% 11.95% 12.19% 12.70% 13.54% 14.38% 9.90% 10.85% 11.39% 9.73% UPS 13.87% 20.53% 20.30% 20.25% 19.42% 14.93% 24.27% 7.08% 30.14% 23.41% 25.55% 19.51% 19.94% ADD YOUR TITLE HERE ADD 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 6

Which Firm is doing better? ROA UPS was doing better than FedEx on the ROE (9.51% > 6.07%) More efficiently using its assets to generate earnings no matter UPS raised money from debt or shareholder’s money. UPS was better than FedEx on generating money. ADD YOUR TITLE HERE ADD ROA 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 average FedEx 1.63% 4.38% 6.45% 7.09% 6.75% 6.51% 6.94% 7.33% 7.32% 5.74% 6.38% 6.30% 6.07% UPS 6.47% 9.10% 9.24% 8.65% 7.16% 11.69% 4.19% 14.61% 10.68% 12.73% 10.44% 9.51% ADD YOUR TITLE HERE ADD 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 7

Which Firm is doing better? WACC both two company’s stock rose between 1992 to 2003 UPS increased its long-term debt to let the weight of equity not to get too high UPS can get lower WACC FedEx 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 average   long-term debt $1,798 $1,882 $1,632 $1,325 $1,398 $1,385 $1,360 $1,776 $1,900 $1,800 $1,709 $1,608 market value of equity $2,205 $2,682 $4,274 $3,363 $4,359 $6,018 $9,453 $16,333 $10,098 $11,893 $16,087 $19,104 $8,822 UPS 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 average long-term debt $862 $852 $1,127 $1,729 $2,573 $2,583 $2,191 $1,912 $2,981 $4,648 $3,495 $3,149 $2,342 market value of equity $11,008 $12,035 $13,630 $14,963 $16,673 $17,282 $21,896 $83,538 $66,663 $61,068 $70,839 $84,167 $39,480 ADD YOUR TITLE HERE ADD 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 8

Which Firm is doing better? EVA UPS got higher EVA than FedEx UPS is a big company and it has larger amount of capital than FedEx Beside the beginning capital, UPS used its capital more efficiently and it has lower WACC FedEx 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 RONA 4.59% 4.05% 8.16% 8.70% 8.25% 8.82% 10.56% 9.23% 10.03% 7.43% 8.10% 11.77% WACC 10.99% 9.72% 11.61% 11.18% 12.56% 12.61% 12.05% 11.64% 11.79% 11.35% 11.53% 10.36% Spread -6.40% -5.67% -3.45% -2.48% -4.31% -3.79% -1.49% -2.41% -1.76% -3.92% -3.43% 1.41% capital $4,078 $4,344 $4,456 $4,655 $5,081 $5,663 $6,882 $7,863 $8,636 $10,090 $10,870 $12,050 EVA -261 -246 -154 -115 -219 -215 -103 -189 -152 -396 -373 170 UPS 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 RONA 13.19% 12.34% 11.40% 14.96% 13.10% 11.02% 14.30% 17.06% 17.22% 14.23% 12.45% 14.15% WACC 14.20% 12.58% 13.32% 12.72% 12.47% 12.12% 11.26% 12.02% 12.09% 11.23% 10.56% 9.04% Spread -1.01% -0.24% -1.92% 2.24% 0.63% -1.10% 3.04% 5.04% 5.13% 3.00% 1.89% 5.11% capital $6,932 $7,195 $8,280 $9,679 $11,796 $12,514 $13,350 $18,845 $17,161 $20,007 $20,802 $23,391 EVA -70 -17 -159 217 74 -138 406 950 880 600 393 1195 标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。标题数字等都可以通过点击和重新输入进行更改，顶部“开始”面板中可以对字体、字号、颜色、行距等进行修改。 9

Which Firm is doing better? conclusion ROA UPS was doing better than FedEx UPS got positive and higher EVA by using capital efficiently and leverage effect. ROE WACC EVA 10

Which Firm can develop a strong performance in the future? Which company can develop a strong performance in the future? Activity Analysis Liquidity Analysis Long-term Debt and Solvency Analysis Profitability Analysis Growth 11

Average days outstanding Working capital Turnover 1. Activity Analysis 2003 Average days outstanding Working capital Turnover Fixed assets turnover Total asset turnover UPS 51.6 7.72 2.41 1.16 FedEx 41.54 37.11 2.58 1.46 Even though these two firms often learn from each other, follow the rival’s strategy, FedEx seems to perform in a more efficient way according to these four indexes. 12

Cash from operations ratio 2. Liquidity Analysis 2003 Current ratio Cash ratio Cash from operations ratio Defensive interval UPS 1.79 0.72 0.84 4.57 FedEx 1.18 0.16 0.56 1.02 UPS apparently performs well in these indexes for all its numbers in the ratios are higher than FedEx’s. UPS is a better firm concerning the ability to satisfy the creditors who choose to lend money to FedEx or UPS. 13

3. Long-term Debt and Solvency Analysis 2003 Debt/equity ratio Times interest earned Fixed-charge coverage ratio Capital expenditure ratio Cash from operations/debt ratio UPS 0.26 36.41 0.33 1.22 FedEx 0.28 10.51 0.83 0.22 0.93 UPS leads the way in paying interest and has a higher debt ceiling. UPS also owns cash, which is more abundant than FedEx’s, to support their potential expansion in. 14

4. Profitability Analysis Items Average net profit margin Average return on assets Average return on equity UPS 6.12% 9.565% 19.94% FedEx 2.64% 6.07% 9.73% UPS is more efficient in using assets and equity than FedEx. UPS is more profitable than FedEx. 15

5. Growth Analysis Items Average sales Average net income UPS 7.32% 18.83% FedEx 11.53% 35.51% In the calculation of growth rate, smaller base value brings higher growth rate. We use absolute value to value the potential. 16

5. Growth rate VS Total revenue FedEx revenue growth rate (2.33) is better than UPS (0.79) during 1992 to 2003 UPS has huge revenue gap between FedEx.(9.6billion) We believe UPS has much opportunity to support the potential growth in the future. 17

Conclusion Conclusion 1.UPS has much more money and solvency ability to support the potential growth in the future. 2.UPS gets higher ROA and ROE. It means they use the assets and equity more efficient. 18

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