Fedex Vs. United Parcel Service
Team 10: Akua Acheampong, Jody Grewal, Kieng Iv, Rhea Rasquinha
October 14th 2010
To: Current and Prospective Investors
From: JARK Inc. Fund Managers re: Battle for Value, FedEx Corp. vs. United Parcel Service, Inc.
The purpose of this memo is provide a recommendation on whether to invest in FedEx or UPS, given that the air transportation market in China is now open to both companies. Outlined in this memo are an assessment of the strategic approaches and an evaluation of the financial and non-financial performance of both companies, which led to the conclusion that UPS is the superior investment opportunity.
1.0 Strategic Approaches for FedEx and UPS FedEx and UPS are package-delivery companies that …show more content…
Although FedEx has a large negative EVA, the share price has continued to rise (see Appendix 4) and MVA is also positive. Stock price and MVA are not mirroring historic EVA and this could be due in part to EVA being driven by figures which are backward-looking and which include subjective GAAP estimates and adjustments.
2.1.4 Relevant Financial Measures
While financial statement, stock performance and value-added measures have their strengths and weaknesses, the financial measures which are most relevant for analyzing the performance of FedEx and UPS are Net-Profit-Margin (NPM), CCAR and WACC. NPM measures the ability to generate revenues and control costs, which is important given the magnitude of these two companies. CCAR measures the return on stock held over time, which is critical given both companies’ long-term commitment to shareowners. A lower WACC reveals lower risk-perception and better ability to generate economic profits.
The relevant financial measures indicate that UPS is superior to EPS. However, when evaluating the performance of FedEx and UPS, non-financial measures must also be
October 14th 2010
To: Current and Prospective Investors
From: JARK Inc. Fund Managers re: Battle for Value, FedEx Corp. vs. United Parcel Service, Inc.
The purpose of this memo is provide a recommendation on whether to invest in FedEx or UPS, given that the air transportation market in China is now open to both companies. Outlined in this memo are an assessment of the strategic approaches and an evaluation of the financial and non-financial performance of both companies, which led to the conclusion that UPS is the superior investment opportunity.
1.0 Strategic Approaches for FedEx and UPS FedEx and UPS are package-delivery companies that …show more content…
Although FedEx has a large negative EVA, the share price has continued to rise (see Appendix 4) and MVA is also positive. Stock price and MVA are not mirroring historic EVA and this could be due in part to EVA being driven by figures which are backward-looking and which include subjective GAAP estimates and adjustments.
2.1.4 Relevant Financial Measures
While financial statement, stock performance and value-added measures have their strengths and weaknesses, the financial measures which are most relevant for analyzing the performance of FedEx and UPS are Net-Profit-Margin (NPM), CCAR and WACC. NPM measures the ability to generate revenues and control costs, which is important given the magnitude of these two companies. CCAR measures the return on stock held over time, which is critical given both companies’ long-term commitment to shareowners. A lower WACC reveals lower risk-perception and better ability to generate economic profits.
The relevant financial measures indicate that UPS is superior to EPS. However, when evaluating the performance of FedEx and UPS, non-financial measures must also be