Finance Case study: just answering the 3 questions and you can refer to the excel file if it is helpful.
The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. (SPREADSHEET) Title Page This spreadsheet supports the STUDENT analysis of the case “The Battle for Value, 2016: FedEx Corp. versus United Parcel Service, Inc. (UVA-F-1773). This spreadsheet was prepared by Jenny Craddock, Senior Case Writer, and Michael J. Schill, Professor of Business Administration. Copyright © 2017 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. For customer service inquiries, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, posted to the Internet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Feb. 13, 2017 Exh 1 Exhibit 1 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Revenues for FedEx and UPS by Business and Geography Segment (millions) FedEx 201020112012201320142015 Geography U.S. Domestic Revenue24,85227,46129,83730,94832,25934,216 International Revenue9,88211,84312,84313,33913,30813,237 Business FedEx Express21,55524,58126,51527,17127,12127,239 FedEx Ground7,4398,4859,57310,57811,61712,984 FedEx Freight4,3214,9115,2825,4015,7576,191 FedEx Services*1,4191,3271,3101,1371,0721,039 UPS201020112012201320142015 Geography U.S. Domestic Revenue36,79539,34740,42841,77243,84045,309 International Revenue12,75013,75813,69913,66614,39213,054 Business U.S. Domestic Package Next-Day Air5,8356,2296,4126,4436,5816,570 Deferred2,9753,2993,3923,4373,6723,903 Ground20,93222,18923,05224,19425,59826,274 International Package11,13312,24912,12412,42912,98812,149 Supply-Chain & Freight8,6709,1399,1478,9359,3939,467 * FedEx Services provides back-office support to FedEx's three transportation segments and printing and retail support to customers through FedEx Office. Data source: Company SEC filings. Exh 2 Exhibit 2 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Operating Results for UPS, Inc. (period ending Dec. 31, in millions) 201020112012201320142015 Revenue49,54553,10554,12755,43858,23258,363 Operating Income (EBIT)5,6416,0801,3437,0344,9687,668 Interest Expense354348393380353341 Net Income3,3383,8048074,3723,0324,844 Capital Expenditures1,3892,0052,1532,0652,3282,379 Cash and Marketable Securities4,0814,2757,9245,2453,2834,726 Accounts Receivable6,1176,2466,1116,5026,6617,134 Total Current Assets11,56912,28415,59113,38711,21813,208 Net Prop., Plant, and Equip.17,38717,62117,89417,96118,28118,352 Total Asssets33,59734,07738,81835,55335,44038,311 Current Liabilities5,9026,5148,3907,1318,62110,696 Total Debt10,84611,12812,87010,87210,77914,334 Total Stockholders' Equity8,0477,1084,7336,4882,1582,491 201020112012201320142015 GrowthCAGR (’10–’15) Revenue Growth7.2%1.9%2.4%5.0%0.2%17.8% Total Asset Growth1.4%13.9%-8.4%-0.3%8.1%14.0% Operating Income Growth7.8%-77.9%423.8%-29.4%54.3%35.9% Net Income Growth14.0%-78.8%441.8%-30.6%59.8%45.1% Asset Efficiency Ratios Working Capital Turnover8.79.27.58.922.423.2Revenue / (C. Assets – C. Liab.) PPE Turnover2.83.03.03.13.23.2Revenue / PPE Capital Expenditure %2.8%3.8%4.0%3.7%4.0%4.1%Capital Exp. / Revenue Total Asset Turnover1.51.61.41.61.61.5Revenue / Total Assets Liquidity and Leverage Ratios Current Ratio2.01.91.91.91.31.2C. Assets / C. Liab. Cash Ratio0.70.70.90.70.40.4Cash & Mkt. Sec. / Curr. Liab. Total Debt / Equity Ratio1.31.62.71.75.05.8Total Debt / Total St. Eq. Times Interest Earned15.917.53.418.514.122.5Op. Income / Interest Exp. Profitability Ratios Operating Margin11%11%2%13%9%13%EBIT / Revenue Net Profit Margin7%7%1%8%5%8%Net Income / Revenue Return on Assets11%12%3%13%10%14%(N. Inc. + Int. Exp.) / T. Assets Return on Equity41%54%17%67%141%194%Net Income / Tot. St. Eq. Economic Profit (millions)*$1,873$2,189-$602$2,832$1,946$3,255 * Economic Profit (EVA) is calculated as EBIT * (1 – t) – CofC × (T. Debt + T. St. Eq), where t = 40% and CofC = 8%. Data source: Capital IQ, Morningstar, company annual reports. Exh 3 Exhibit 3 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Operating Results for FedEx Corp. (period ending May 31, in millions) 201020112012201320142015 Revenue34,73439,30442,68044,28745,56747,453 Operating Income (EBIT)1,9982,3783,1864,4343,8151,867 Interest Expense79865282160235 Net Income1,1841,4522,0322,7162,3241,050 Capital Expenditures2,8163,4344,0073,3753,5334,347 Cash and Marketable Securities1,9522,3282,8434,9172,9083,763 Accounts Receivable4,1634,5814,7045,0445,4605,719 Total Current Assets7,2848,2859,05611,2749,68310,941 Net Prop., Plant, and Equip.14,38515,54317,24818,48419,55020,875 Total Asssets24,90227,38529,90333,56733,07037,069 Current Liabilities4,6454,8825,3745,7505,3125,957 Total Debt1,9301,6851,6672,9904,7377,268 Total Stockholders’ Equity13,81115,22014,72717,39815,27714,993 201020112012201320142015 GrowthCAGR (’10–’15) Revenue Growth13.16%8.59%3.77%2.89%4.14%36.62% Total Assets Growth9.97%9.19%12.25%-1.48%12.09%48.86% Operating Income Growth19.02%33.98%39.17%-13.96%-51.06%-6.56% Net Income Growth22.64%39.94%33.66%-14.43%-54.82%-11.32% Asset Efficiency Ratios Working Capital Turnover13.1611.5511.598.0210.429.52Revenue / (C. Assets – C. Liab.) PPE Turnover2.412.532.472.402.332.27Revenue / PPE Capital Expenditure %8.1%8.7%9.4%7.6%7.8%9.2%Capital Exp. / Revenue Asset Turnover1.391.441.431.321.381.28Revenue / Total Assets Liquidity and Leverage Ratios Current Ratio1.571.701.691.961.821.84C. Assets / C. Liab. Cash Ratio0.420.480.530.860.550.63Cash & Mkt. Sec. / Curr. Liab. Total Debt / Equity Ratio0.10.10.10.20.30.5Total Debt / Total St. Eq. Times Interest Earned25.327.761.354.123.87.9Op. Income / Interest Exp. Profitability Analysis Operating Margin5.75%6.05%7.46%10.01%8.37%3.93%EBIT / Revenue Net Profit Margin3.41%3.69%4.76%6.13%5.10%2.21%Net Income / Revenue Return on Assets5.07%5.62%6.97%8.34%7.51%3.47%(N. Inc. + Int. Exp.) / T. Assets Return on Equity8.57%9.54%13.80%15.61%15.21%7.00%Net Income / Tot. St. Eq. Economic Profit (millions)*-$60$74$600$1,029$688-$661 * Economic Profit (EVA) is calculated as EBIT * (1 − t) − CofC x (T. Debt + T. St. Eq), where t = 40% and CofC = 8%. Data source: Capital IQ, Morningstar, company annual reports. Exh 5 Exhibit 5 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Financial and Market Performance FedEx 201020112012201320142015 Stock Price, Dec. 31 Close93.0183.5191.72143.77173.66148.99 Dividends Declared in $ Per Share0.440.480.520.560.60.8 Basic EPS (period ending May 31)3.794.66.448.617.563.7 Price/Earnings22.315.214.727.822.037.9 Annual Return -9.7%10.5%57.4%21.2%-13.7% Cumul. Annual Return -9.7%0.8%58.1%79.3%65.6% UPS 201020112012201320142015 Stock Price, Dec. 31 Close72.5873.1973.73105.08111.1796.23 Dividends Declared in $ Per Share1.882.082.282.482.682.92 Basic EPS 3.363.880.844.653.315.38 Price/Earnings20.917.888.567.127.622.0 Annual Return 3.71%3.85%45.88%8.35%-10.81% Cumul. Annual Return 3.71%7.56%53.44%61.79%50.98% Standard & Poor’s 500 Index201020112012201320142015 Index Level, Dec. 31 Close1,257.641,257.601,426.191,848.362,058.902,043.94 Annual Return -0.0%13.4%29.6%11.4%-0.7% Cumul. Annual Return -0.0%13.4%43.0%54.4%53.7% Data source: Google Finance, Morningstar, and Capital IQ. Figure 1 Figure 1 The Battle for Value, 2016: FedEx Corp. vs. United Parcel Service, Inc. Market Share U.S. Package Market, 2015 Revenue Share – 2015 UPS48.6% FedEx33.4% USPS18.0% Ground Revenue Share – 2015 UPS49.8% FedEx25.9% USPS24.3% Express Revenue Share – 2015 UPS45.7% FedEx50.9% USPS3.4% Source: Brandon Oglenski, Eric Morgan, and Van Kegel, "North American Transportation and Shipping Equity Research," Barclays, May 2, 2016. Ground Revenue UPSFedExUSPS0.4980.259000000000000010.24299999999999999 Express Revenue UPSFedExUSPS0.457000000000000020.509000000000000013.4000000000000002E-2