FedEx Ups Research Paper Samples
Type of paper: Research Paper
Topic: Company, Competition, United States, Market, Investment, Trend, Services, Taxes
FedEx is a global company that offers courier services that is based in Memphis, in US. It was established in 1998, though it has been in existence from 1973 as a federal express. It is a public company that is listed in the New York stock exchange. This company will be compared with united parcel services (UPS), which is a large logistic and shipment company that is based in sandy spring, Georgia. The two companies were selected due to the fact that both companies operate in the courier industry and they are listed in the New York stock exchange. UPS is a key competitor since it was founded earlier than fedex and has a slightly larger market share especially in Europe. The Average Daily Returns (earning per share) for the Fedex Stocks is 0.8 while that of UPS is 2.92. The S&P 500 Index from 1/26-2/20 for Fedex is 178 while that of UPS is 102.
2.0 Industry Overview
The companies operate in a courier industry that has many competitors both locally and globally. Local competitors include TNT and USPS, while global competitors include DHL, G4S, among others. The industry has both small and large companies that offer wide variety of services to their clients globally. In regards to the latest news, FedEx has shown a strong support to the recent proposal by the US secretary of the state to negotiate for open sky with Qatar and United Arab Emirates. The CEO of the company argued that such agreement would liberalize the airspace make it more friendly to all competitors in the industry. On the other hand, UPS announced an increase in quarterly dividend by about $ 0.73 per share with effect from February 2015.
3.0 SWOT Analysis
The major strength of FedEx is that it enjoys about 49% of the shipping market in US. It has about 401 aircraft that include airbus, Boeing among others. It also has a number of subsidiaries such as FedEx office, FedEx freight, FedEx ground, FedEx trade networks, just to mention a few. The number of air crafts was high compared to those owned by UPS at that time. UPS had about 203 aircrafts and over 100,000 vehicles for the ground. In addition, it has a large network with its presence in more than 200 countries globally. The company has also embraced IT in the provision of its services, a strength that has given it a competitive edge in the market.
On the other hand, the company has over depended on the US market, which is competitive and with limited opportunities for growth. This is a major weakness given that its competitor, UPS mainly major on the European market which is wider and more profitable compared with the domestic market. It has also been associated with illegal businesses such as drug dealing (Moyer 1). However, the company can utilize several opportunities at its disposal such as use of cooperative strategies in order to increase its profitability in other regions (Ron 1). There are also many local competitors that offer products and services for low quality. This gives the company a competitive edge in the local market. The major threats facing the company at the moment is increased competition from other courier companies such as UPS, TNT, and USPS, varying demands in the market, and shaky global oil prices that may affect its profitability.
4.0 Financial Statement Analysis
The net income for the company has increased tremendously in the last five years, from a net income of $ 1.18 billions in 2010 to $ 2.09 billions in 2014. The total revenue has also increased from $ 34.73 billions in 2010 to 45.57 billions in 2014. This is low compared with a net income of $ 3.0 billion and revenue of $ 58.2 billions that were reported by UPS in 2014. -Liquidity Analysis (trend and competitive)
Current ratio 1.82 1.37
Cash ratio 0.55 0.74-Asset Management Analysis (trend and competitive)return on equity 12.81 70.39-Debt Management Analysis (trend and competitive)debt to total equity 31.01 35.6-Profitability Analysis (trend and competitive)Gross margin 20.57 28.5-Market Ratio Analysis (trend and competitive)return on invested capital 10.43 21.56
Market share (US) 49% 46%-Du Pont Analysis (trend and competitive)Enterprise Value to EBITDA 8.50 8.60
5.0 Capital Asset Pricing Model (CAPM)
The beta for FedEx is currently 0.62, showing that the price of its stock does not vary much. Over the last five weeks, the price of FedEx share has varied from $ 176-178. This represents a variation of less that 1% of the total price. On the other hand, the beta for UPS in the same period has been 0.9 showing some variation in its stock price. The price of UPS share has varied from $100 to $ 106 within the same period. This shows a greater variation compared to the price of FedEx share.
6.0 Two Stage Dividend Growth Model
At the moment, the annual earning per FedEx share is $ 0.8 while that of UPS is $ 2.92. Given their rate of growth, UPS’s earning is likely to increase compared to FedEx’s earnings in the next 2 years.
7.0 Work Cited
Moyer, Justin. "FedEx indicted for drug dealing. Not a delivery guy — the whole company." Washington Post 18 July, 2014. Print.
Ron Da Parma. "IRS says FedEx may owe $319 million". Pittsburgh Tribune-Review. 27 December, 2007. Print.
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