The Battle for Value, 2004: Fedex Corp. Vs. United Parcel Service, Inc.

THE BATTLE FOR VALUE, 2004: FEDEX CORP.

VS. UNITED PARCEL SERVICE, INC.

1 What happened to FedEx and UPS’s stock price in early 2004? Why did they rise? Why did one outpace the other? In an efficient market, how are we to interpret FedEx’s 14% increase in market value?

The stock price of both companies rose due to the air transportation agreement between United States and China and the market opportunities of this deal in China for FedEx and UPS. FedEx outpaced UPS because it had a large presence in China.

2 Why didn’t UPS create overnight delivery? How did FedEx get away with successfully entering this market?

UPS was unable to enter the overnight market due to the cost of creating an air fleet. FedEx got away with it because they always had their own air fleet from the beginning.

*UPS being tradition bound*

3 What is going on in this industry? How are the two firms competing? What are the competitive prospects for the foreseeable future?

They are both competing head-to-head for operational excellence with the hopes of producing better financial returns. They are both innovative companies that are always looking for new ways to improve their operations and not allowing their company to fall behind the competition. They both focus on customer satisfaction and well as providing the lowest price.

*they are now technology companies *

4 How have UPS and FedEx performed financially? How do you measure financial performance? What do the financial statements and ratios show? What does the stock-price performance tell you? How is EVA calculated? What does it reveal? Does stock price track the historical EVA?

FedEx has higher growths but UPS has higher profits and returns on assets. I measure the financial performances by comparing the financial statements and financial ratios.

Revenue Growth: FedEx has had more revenue growth in the past 5 years.

Asset turnover ratio: UPS has been leading since 2012. (Total assets turnover ratio is measured by dividing sales by assets., it is used to see how much revenue they can create with their assets)

Current Ratio: FedEx out performed (Calculated by dividing assets by liabilities to measure the liquidity)

Debt to equity ratio: UPS in the past 2 years have been aggressive in financing it’s growth with debt. (D/E ratio is calculated by dividing the liabilities by stockholder’s equity. It measures how much debt they use to finance the company’s assets.)