Fedex vs Ups

The Battle for Value

Andrew Hall

Yo Yo Ma

Jerry Seinfeld

Team One

22nd May 2008

Contents

Objectives 1

Management Summary 1

Sustainable Competitive Advantage 1

Enabling Factors 1

Inhibiting Factors 2

Conclusion 2

Interpretation of the 14% Increase in FedEx’s Market Value of Equity 2

FedEx and UPS share price and liberalized air cargo routes between the U.S. and China 3

Conclusion 3

UPS and FedEx Performance Since Early 1990’s 3

Financial Statement Analysis 3

Ratio Analysis 3

Activity Ratios 3

Liquidity Ratios 4

Profitability Ratios 5

Growth 5

Stock-Price Performance 6

Economic Value Added 6

Market Value Added 7

Conclusion 7

Excellence in Business 7

Conclusion 7

Appendices 7

Objectives

This report seeks to answer the following four questions about UPS and FedEx:

1. What are the enabling and inhibiting factors facing the two firms as they pursue their goals? Do you think that either firm can attain a sustainable competitive advantage in this business?

2. Why did FedEx’s stock price outstrip UPS’s during the initiation of talks over liberalized air cargo routes between the U.S. and China? Assuming a perfectly efficient stock market, how might one interpret a 14% increase in FedEx’s market value of equity?

3. How have FedEx and UPS performed since the early 1990s? Which firm is doing better? Discuss the insights you derived from the two firms’ financial statements, financial ratios, stock-price performance, and economic profit (economic value added or EVA).

4. If you had to identify one of those companies as excellent, which company would you choose? On what basis did you make your decision? More generally, what is excellence in business?

Management Summary

The enabling factors for the two firms are economies of scale, technological and operational excellence and market dominance. The inhibiting factor for FedEx is financial weakness; for UPS it...