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Executive Summary
It was known as the largest Initial Public Offering (IPO) in history. United Parcel
Service (UPS), an employee-owned operation, had announced that the company would be
initiating an IPO. The company was worth a net income of 1.7 billion, and had a history
of a solid financial performance. This offering was seen in the eyes of the company as an
opportunity that would give the company flexibility to gain more control over global
commerce. The main concern would be the determining of the share price, planned to be
announced only a few hours before the purchasing of this stock would begin. UPS joined
forces with Morgan Stanley Dean Witter & Co. to complete the task of pricing the shares
(Healy). In order to price the shares this team considered many different factors and
alternatives to which the share price could be based upon. After considering and
researching information related to this case, the obvious solution would be for UPS to be
benchmarked relative to best-of-breed industry leaders, and have their share price set at a
premium compared to FedEx Corp.
This paper will begin by presenting a brief overview of the history of UPS,
followed by the introduction of the company’s main competitors, FedEx and USPS. A
S.W.O.T. analysis of the company and its competitors will then be presented. This will
then be followed up with the introduction of the main concern of this paper, which is
considering the company’s past and future financial success, should FedEx or best-of-
breed industry leaders be the reasonable benchmark for valuing UPS stock, or should
UPS choose a different alternative to use as its benchmark? These different alternatives
will then be analyzed according to their strengths and weaknesses in order to select the
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best solution. After considering each alternative based on the data presented, the solution
will then be introduced.
History
UPS was founded in 1907 as a small messenger service by a man named James
Casey. The company was first introduced as the American Messenger Service, only later
to become known as the United Parcel Service (UPS). The company, based out of
Seattle, began its service by delivering letters, food, and luggage, through the use of foot,
bicycle, and streetcar (Healy). Casey and his partner ran the business with a handful of
teenagers as messengers. They set “strict policies of customer courtesy, reliability,
round-the-clock service, and low rates” (ups.com). These policies are still part of the
company’s strong foundation today.
Throughout the 1920’s the company began to shift their focus to package
delivery, working along side retailers. This shift gradually led to a geographical
expansion. At this time the company started to implement the use of automobiles and
motorcycles. The company also adopted the practice known as “common carrier” or
consolidated delivery (ups.com). The purpose of this practice enabled the company to
merge together packages of a neighborhood into a single delivery truck (ups.com). The
company was also the first to contract and make use of the first-ever mechanical sorter
and conveyer belt (Healy).
Throughout the next three decades the company continued to grow. The company
began to realize that in order to do this they would need to expand to new geographical
areas, which eventually led to thirty years of state and federal petitioning in order to
acquire “common carrier” rights. These rights would allow them to deliver packages to
3
all customers, both private and commercial (ups.com). By the 1980’s UPS had grown so
much that they had passed up their biggest competitor at that time, United States Parcel
Service, when it came to parcel volume (ups.com). In the course of the next two decades,
UPS became the largest ground carrier service in the country (Healy).
UPS began offering a two to three day air delivery service in 1953, and later
launched next day air service in 1985. Throughout the 1980’s the company also began
to focus more on their use of technology, their pricing and marketing strategies, as well
as the employing of new systems customized to improve the tracking, managing, and
shipping of their deliveries (Healy). The focus and implementation of these new
applications were the reasons why UPS ascended to where they did.
Competition
The package delivery industry can be broken up into three distinct customer
categories. These categories include the sending of overnight letters, the shipment of
small to medium sized packages by those who request shipment of time-critical parcels,
and the movement of heavy freight between large corporations. UPS had two major
competitors in this industry, FedEx and USPS. Other minor competitors included
Airborne Freight, CNF, and DHL (Healy). UPS and its competitors each offered services
in each of the three segments, although each company had characteristics and dominant
areas different from one another. A S.W.O.T. analysis for each company, UPS, FedEx,
and USPS, will now be presented which can be used to compare UPS to its competitors.
By evaluating the information provided in these analysis,’ an understanding as to where
each company stands in this industry, when it comes to what each company has to offer
4
and how they differentiate from each other, will now become evident. Some of the
opportunities and threats will be the same for all three companies.
S.W.O.T. Analysis-UPS
Strengths:
Provides both air and ground service
Holds 51% share of market by revenue
Market leader in the $17 billion ground segment
Consistent financial success
AAA credit rating
Integrated sorting centers
Weaknesses:
Number two to USPS in the deferred segment
Number two to FedEx in the overnight express market
Opportunities:
Growing GDP
Growth of Internet shopping (E-Commerce)
Growth in international delivery (globalization)
Supply chain management
Plenty of resources for expansion
Threats:
Digitization of documents and introduction of electronic signatures
Industry competition
New ground segment competition
5
Labor Issues
Fuel cost issues
IRS issues
S.W.O.T. Analysis-FedEx
Strengths:
Market leader in the overnight express segment, accounting for 84% of total
revenues and 83% of operating income in 1998
A $17 billion global transportation and logistics enterprise
Can move over 3 million packages a day, with availability to almost all addresses
Single handedly pioneered concept of overnight delivery
Weaknesses:
Behind UPS with 26% share of market by revenue
Inferior financial performance compared to UPS
BBB credit rating
Separate operating centers for ground and air
Opportunities:
Growing GDP
Growth of Internet shopping (E-Commerce)
Growth in international delivery (globalization)
Supply chain management
Recently acquired RPS which was second behind UPS in ground delivery
business-to-business small-package shipper
6
Threats:
Digitization of documents and introduction of electronic signatures
Industry competition
Fuel Cost issues
S.W.O.T.-USPS
Strengths:
Offers prominent service called “Priority Mail”, which is shipment to any
destination in country in 1 to 3 business days, and considered less expensive than
UPS and FedEx’s 2 to 3 day service offerings
Market leader in the deferred segment
Quasi-government entity which moves more than four times as many deliveries a
day than UPS and FedEx combined
Weaknesses:
Holds 17% share of market by revenue
E-mail and electronic communication undercutting traditional mail
Priority Mail less reliable than UPS and FedEx
Lacked premier logistics
Opportunities:
Growing GDP
Growth of Internet shopping (E-Commerce)
Growth in international delivery (globalization)
Supply chain management
7
Rumor is that Lockheed Martin is helping them create an advanced tracking
system
Threats:
Digitization of documents and introduction of electronic signatures
Industry competition
* Information in S.W.O.T. analysis’ provided by Healy Case Study
Current Industry Trends
With the leverage an IPO offers and the company’s current financial strength,
UPS will look to strengthen their position in three categories of industry trends and
opportunities. UPS is choosing to focus on these current industry trends because they
believe that they define the packaging industry of the future. The following three trends
and opportunities include:
• Globalization
• E-Commerce
• Supply-Chain Management
It is important for the company to consider these three opportunities and trends, because
they are a big reason why UPS is planning to issue an IPO.
The first up-and-coming trend the company is planning to focus on is
globalization. UPS wants to strengthen its package delivery business throughout the
whole world. Since the emergence of the Internet, borders that used to hinder the
business world are now being lifted. Businesses are now able to conduct business with
any other business or consumer throughout the world. With the increase of business
activity due to the Internet the shipping industry has picked up. This has led to an
8
increase in demand for the company’s services. For example, in the second quarter of
1999, UPS proved it was eyeing international expansion by acquiring Challenge Air
Cargo, the largest all-cargo airline serving Latin America (Lacey). Continuing to expand
globally would no doubt help UPS stay competitive within this particular segment, and
therefore continue their industry superiority overall.
The second rising opportunity is E-Commerce, mainly focusing on the delivery of
goods purchased on the web. More than ever consumers are depending on the Internet to
make their purchases. The materialization of such sites as E-Bay and Amazon.com has
brought this shipping industry into one of its own. UPS has already made a name for
itself in this environment, with over 10,000 websites offering UPS functionality (Healy).
In reference to the upcoming offering, Stephen Lacey, an IPO reporter states, “In the
year of the internet, another potential attraction to the UPS offering is the company’s
seemingly farflung ties to e-commerce. According to the company’s filing, UPS
commands about 55% of the total market for the distribution of goods purchased over the
internet.” Still, UPS needs to develop this market further, and promote itself as the
dominant player in the Internet shipping business.
Supply chain management is the third growing trend that can be used to define the
package delivery system of the future. UPS plans to be an integral player in the world of
synchronized commerce by helping our customers streamline their operations and
integrate their supply chains to better serve their customers, drive efficiencies, eliminate
waste and create more sustainable business models (sustainability.ups.com). Much of the
funds that will be used here will be to help the company develop and manage their
inventory and shipping logistics. These plans are a much more efficient and effective
9
way to handle inventory, because the inventory would be “always in transit” (Healy).
Also, the UPS Logistics group offers suppliers a portfolio of financial services and
software applications to help them manage key functions of their businesses, particularly
inventory and shipping logistics (Healy).
Although the profits generated by the IPO could be used to further expand UPS in
these future trends and opportunities, the company is fortunate to be able to support a
majority of their expansion efforts with operating cash flows (Healy). The IPO would
instead serve as “an attractive tax-efficient medium of exchange-to fund any subsequent
acquisitions” (Healy). This could be attractive to potential investors because it flexes
UPS’s muscle a little bit. The money is in fact something that UPS does not need due to
3.4 billion in cash reserves (Lacey). This figure is no doubt appealing to potential UPS
investors.
Furthermore, UPS maintains an AAA credit rating, while their main competitor
FedEx, maintains a BBB (Healy). An AAA rating shows an excellent capacity to service
and repay debt, while a BBB rating shows capacity for satisfactory results, but adverse
conditions can increase the risk (Standardandpoors.com). Once again investors are
turned on by such high quality marks for UPS. Arthur Hatfield states, “Their cash flow
and AAA debt rating give them sufficient resources to grow their business” (Lacey).
Lacey goes on to say, “Freeing up its stock, however, would enable UPS to pursue
acquisitions through a combination of equity, debt or cash, making the company even
more attractive to potential partners. Given the erosion of trade barriers across the
European continent and elsewhere, this additional financial flexibility has become
10
increasingly important” (Lacey). This further justifies the IPO and also shows just how
attractive UPS stock will be to potential investors.
Introduction of Problem
“Our goal is to remain the pre-eminent global company in our industry in the 21st
century. By having available a publicly traded equity security, UPS will be able to take
advantage of opportunities around the world to grow its business. The decision to go
public reflects our willingness to embrace change, something UPS has done repeatedly
since being founded as a messenger company in 1907” (www.shareholder.com). In July
of 1999, UPS, a ninety year old company made it known that it was planning an initial
public offering which was to be the largest IPO ever by an American company
(www.shareholder.com). This offering would change the face of the company forever,
and was deemed to be a stepping stone for the company’s future continuation of success.
UPS’s plan was to create two classes of shares. The first class was Class A stock,
which would be sold to existing owners and would carry ten votes each. The second
would be Class B stock, which would be sold to the public and would carry only one vote
each. UPS plans to use the finances generated from the sale of the IPO to repurchase
Class A stock from shareholders. Gradually, Class A shares will become available to the
public and become Class B shares (Healy). After the execution of this plan, UPS
estimates that the company’s current shareowners will then own 90% of the company’s
equity and control 99% of the vote (Healy). This would enable them to keep a firm grip
and preserve the employee-owned tradition while providing them with another resource
for expansion and upgrading. Though, interviewee Kurt Schletzer, an Investment
Representative for Edward Jones, believes that a company as big as UPS should remain
11
employee owned, and that the option to go public has its disadvantages. He feels that
when a company is doing well, then its employees are the ones who are rewarded, with
rights to ownerships and with earnings. Once a company goes public, they will have to
worry about a board of directors, and a company will be limited to the amount of funds
they can raise.
For this public offering UPS has elected to use the company of Morgan Stanley
Dean Witter & Co., co-managed by Goldman Sachs, Merrill Lynch, Credit Suisse First
Boston, Salomon Smith Barney and Warbug Dillon Read, to help in the pricing of its
shares (www.shareholder.com). Through the work of this joint collaboration, their main
concern will be choosing the price of their stock. Because of the company’s history of
financial and operational success, the company was faced with a difficult, but good
situation. They would have to decide on what benchmark to base their price on, while at
the same time making sure not to underestimate their value. In order to choose their
opening share price, UPS and Morgan Stanley Dean Witter & Co. had chosen to look at
the following valuation benchmarks,
• The trucking industry
• The company’s main competitor FedEx
• Other best-of-breed companies in other industries
When evaluating these three benchmarks, UPS would have to consider factors such as
current industry trends, the success and financials of competitors in this industry and
other industries, as well as the success and financials of their own company. Finally,
after researching and analyzing these factors, UPS will then be able to choose their
valuation benchmark. Interestingly, the team decided the trucking industry was too
12
limited and not a good source for valuing the company (Healy). We agree as UPS offers
quite a different transportation service as well as operating branches that compete more
on a level with FedEx, USPS, and others.
Choosing FedEx as a Benchmark
In the package shipping industry FedEx Corporation is UPS’s main competitor.
FedEx, which is based out of Tennessee, operates a fleet of 634 airplanes and 41,000
pickup/delivery vehicles. It has 88,000 full-time workers and 50,000 part-time workers.
When compared to UPS, UPS has a fleet of 500 airplanes, 149,000 pickup/delivery
vehicles, and has over 340,000 employees (Healy). FedEx, which started out as an
overnight air express delivery service has since diversified their services to other aspects
of the package delivery industry. To further strengthen their company FedEx acquired
Roadway Package System (RPS), which was the second-largest ground delivery service
behind UPS (Healy). In order to keep FedEx Ground’s costs lower than UPS’s they use
contract drivers and trucks which are much cheaper then UPS’s Teamster organized
delivery workforce. They also have invested in RPS’s existing ground networks to help
them expand their reach to more customers, and to also help in increasing customer
service through technology and training (Healy). They also are looking to the
international delivery service as a key source of business growth for the future
(www.fedex.com).
However, there is evidence and facts that suggest FedEx is not a reliable
benchmark for valuing UPS stock. One key factor is that UPS relies more on the ground
aspect of package delivery where as FedEx relies more on the air/express aspect of the
13
industry. With this, the cost structures of ground delivery verses air/express delivery are
very different.
Another key factor that suggests FedEx is not a reliable valuation benchmark is
the fact that UPS handles many more packages a day then FedEx. Meaning UPS drivers
will pick up and deliver a great deal more packages a day then FedEx drivers.
Another major difference between the two companies is that UPS has integrated
its ground and air/express services as one company. The company shares all their
resources and assets, for example, their sorting centers and trucks. UPS’s management
team thinks that this has developed a strong advantage for UPS over its rival FedEx.
Lastly, there are also differences in the financial management sector of the two
companies. As we said earlier, UPS has an AAA credit rating where FedEx has a BBB
credit rating.
One aspect where FedEx is superior to UPS is in the customer service department.
FedEx over the years has relied heavily on its superior customer service to gain
customers. The company is known to be committed to its customers. This is shown by
its best-in-industry on-time reliability record (Healy). Also, FedEx’s operations are
segmented into many parts. Because of this they can help their customers better by giving
them a more options for what they want. They feel that because their ground and
air/express departments are segmented, they can speed up the delivery process. On the
other hand, UPS is integrated into one company, in which FedEx believes this integration
slows down the package delivery process. FedEx greatly stresses their segmentation and
feels that it is one of the key aspects in whom and what the company is
(www.fedex.com). They even take a jab at UPS’s operations, when talking about the
14
integrated approach by saying, “when it comes to shipping, one size does not fit all”
(www.fedex.com).
The following chart depicts how each company goes through their delivery
process.
*
*Chart adopted from Healy Case study
Further evaluation
In developing a solution to the valuation problem such as this we must also look
at key industry holdings. In looking at figures from the Healy case, UPS holds 51% of
the market share by revenue, where FedEx has only 26% of the market share based upon
revenue.
Customer
With UPS….. UPS Brown
With FedEx….
Customer
FedEx Express
FedEx Ground
Sorting Center for Express and Ground
Sorting Center for Express
Sorting Center for Ground
To Destination
To Destination
To Destination
15
% Share of Market by Revenue
UPS51%
FedEx26%
USPS17%
Other6%
UPSFedExUSPSOther
Next, by looking at this chart we see that UPS’s Domestic Revenue for 1998 was
2.169 times greater then that of FedEx. Internationally, UPS has a stronger position
package wise than FedEx as well, so the figures would give UPS an even greater
advantage.
1998 Average Daily Package
(Volume=Thousands of Packages) UPS FedEx
U.S. Express (Air)
938 1957
U.S. Deferred
783 894
U.S. Ground
9645 1385
1998 Average U.S. Revenue/Package
Express (Air)
$19.69 $14.34
Deferred
$12.39 $9.93
Ground
$5.51 $5.36
1998 Tot. Rev. packages delivered U.S.
$96,230,110 $44,364,400
Summary of UPS and FedEx Operating Statistics *Numbers adopted from Healy Case Study
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If UPS is going to benchmark their IPO upon FedEx then we must also look at
what their shares are going for in the market.
Market Data and Multiples—(November 1, 1999)
Shares Outstanding(Weighted average,diluted) 300.6 million
Share Price $41.50
Price/Earnings 19.8
Price/Total Revenue 0.74
Market/Book Value 2.68
Equity Beta 1.16
*Healy Case Study
From this table we see that FedEx has 300.6 million shares outstanding at a price
of $41.50 per share. If UPS was to use FedEx’s company as a benchmark to value their
stock then they would set their prices from a range of $38 to $44 a share. Interviewee
Kurt Schletzer feels that UPS should not use FedEx as their benchmark for setting their
share price. Schletzer states, “If a company has no respect for another company, and they
feel that they are the premier company, then why use the other company as a
benchmark?”
UPS as a Best of Breeds Company
Another alternative that UPS could use when valuing their stock would be to
reflect their stock as if they were a “best-of-breed” type company. In doing this UPS
would value themselves at a premium due to being the superior company in the package
delivery industry. UPS feels that with their 51% share of market revenue that they are a
“best-of-breed” type company. With their superior performance they feel that their stock
17
should be priced higher than the other firms in the industry to further exemplify their
strengths. Examples of such companies that are in this higher class are Coca-Cola, Wal-
Mart, and Home Depot. Exhibit 13 of the Healy Case data is presented on industry
leaders and their main competitors. The following chart shows this data and also
includes a hypothetical UPS/FedEx comparison.
Stock
Price
Market Cap
(Billions)
Net Income
(Millions)
ROE Price to
Earnings
Market to
book
Home Depot $68.50 100.8 1,979 25% 50.9 12.7
Lowes $49.31 18.9 556 17% 34.1 5.8
Coca-Cola $49.94 124.7 3,174 40% 39.3 15.6
PepsiCo $32.19 48.9 1,921 31% 25.5 7.9
Wal-Mart $50.81 227.4 4,927 25% 46.1 11.6
Target $64.31 28.4 1,052 22% 27 6
UPS ? 39.4-45.9 *taken
from (Rocks)
1,700 25.2% ? ?
FedEx $41.50 12.4 631.333 10.6% 19.8 2.68
*adapted from the Healy Case Study
The data in the table above show that UPS would likely command a higher stock
price if the numbers were to stand true in their industry. Their market capital is
significantly higher than FedEx, which is true for the other three companies that lead
their industry. Net income figures and return on equity also follow this same pattern.
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UPS employs over 340,000 and has customers all over the world. UPS also
delivers over 13 million packages each day from over 2 million addresses to over 6
million commercial and residential addresses across the world. UPS also has contacts
with 1.8 million customers every day, including every company in the Fortune 1000
(Healy). These are no doubt very impressive stats and UPS has not gone unrecognized
for their previous success in operations and performance. In 1999 Fortune magazine
named UPS as the “World’s Most Admired Global Mail, Package and Freight Delivery
Company.” While Forbes magazine named UPS “Company of the Year” (Healy). The
recognition of these two large circulation magazines will undoubtedly leave a positive
impression on those who read them.
Further, for UPS to be able to be so successful they need a very highly
sophisticated IT system, which they have developed and upgraded to ensure to their
customers the best in reliability, efficiency, and speed (Healy). Also helping to make the
company more efficient and effective are precise driving routes and quality sorting
facilities, where packages are moved swiftly but effectively in that an Air package that
can be delivered by truck in less time will be redirected to ground delivery. This allows
for improvements in cost efficiency that a segmented operation such as FedEx could not
reproduce.
Again, UPS handles 55% of all distribution from e-commerce, which includes
shopping done over the internet. When it comes to Christmas, many consumers do not
mind waiting a couple days to get their items (www.thestreet.com). UPS’s low cost
shipping methods are ideal for online shopping deliveries during such a peak period for
all businesses. Internet shopping is becoming more and more convenient for shoppers
19
and it is drawing in a lot of business for UPS. In the fourth quarter of 1999 it is expected
that 9.5 billion dollars will be spent during the holiday season (www.thestreet.com). This
is a big plus for a company that is dominant compared to its rivals in this sector of the
package delivery market (www.thestreet.com). Not only does this abide well for the
superiority of UPS, but it also stresses a focus on the e-commerce sector of business
expansion.
Another reason to rank UPS as a “best-of-breed” company is because of their
loyal workforce. UPS has recruited many of their employees through part-time positions
and training programs. These employees are then trained and sent through carefully
studied work programs at a cost of 300 million annually (Healy). These training
programs and on the job mentors have led to UPS having one of the lowest turnover rates
in the industry. UPS also promotes from within which leads to employees staying with
the company longer and being more loyal to it (Healy). Over 200,000 of the UPS
employees are members of the International Brotherhood of Teamsters, making UPS the
main group of workers for that union (Healy). This along with other factors help to
conclude that “controls, rules, detailed union contracts, and carefully studied work
methods help to guarantee the customer reliable, low-cost service” (Healy).
On the other side some sources believe that UPS’s IPO will start off with a bang
but its prices will drop after a few months. For instance, David Rocks feels that UPS is a
slow but steady blue chip which will command much respect. But after the glow fades
from the IPO they fear that UPS stock will face the same fate as FedEx’s stock (Rocks).
FedEx stock fell through because of less then expected growth rates and higher fuel cost.
These costs led to FedEx’s stock plunging nearly 12% in one day. UPS has already
20
stated that they are also concerned that they too will be affected by these higher fuel costs
much like FedEx.
Another major issue of concern for UPS is their workforce. Two years ago UPS
was hit hard by the strike of their employees which amounted to great financial and
customer relation losses. The Teamsters organization is now bringing up that UPS has
not fulfilled its side of the deal and has not hired the 2,000 new employees that they said
they would (Rocks). CEO Kelly has also said that UPS is being threatened by postal
services which are getting more and more aggressive (Rocks).
Lastly, UPS has had a history of troubles with the IRS. In 1999, just before the
launch of the IPO, it was announced that UPS had to pay $300 million in taxes and
penalties to the IRS due to infractions that dated back to the 80’s (Hahn). Fortunately, a
company that is as successful as UPS will have little trouble paying this debt. IRS
troubles are not uncommon for big business and this event should have little effect on the
company and investors interest. Alex Brand, a transportation analyst with Scott &
Stringfellow says, “I think you have to put it in the context of $25 billion organization, I
can’t see that it would have any impact whatsoever. It’s a non-event for an IPO” (Hahn).
Others believed it would affect the IPO a little more than Mr. Brand leads us to believe,
but it is hard to imagine it being much of a blow to such a successful, well-established
company.
Is UPS’s dominance of the industry good enough to establish themselves as a
“best of breed” type company? Some sources are skeptical when considering whether or
not UPS’s stock should be priced much higher than FedEx’s stock. However, these same
skeptics believe that UPS is a dominant company in the package delivery industry, and
21
believe that UPS should not be priced a lot much higher than FedEx, but that they still
should be priced a little higher because of their great track record and continual growth
and dominance of the industry.
Decision time
After a careful look at UPS’s standing as compared to that of their competitors, it
is easy to see that UPS is no doubt superior in many ways. With an eye on the future and
a new bargaining chip on the horizon it seems that UPS is destined to remain one of the
most respected companies around. The creation on a new medium of exchange will help
UPS concentrate their efforts to expand globally with key acquisitions in markets abroad.
Also, a tightening of their grip in the e-commerce realm will also prove to be a strong
point for the company. Being able to upgrade their supply chain management and
helping others do the same will also be a factor in UPS’s future. In a changing world like
package delivery, which gets more and more complicated daily, being able to have a
efficient and effective operation is key. The UPS Logistics group seems to have a good
idea of just what they want to accomplish in the future.
By being able to generate the most revenue in the industry, with the majority
coming in from their ground delivery segment, UPS is able to more than make up for
their second-best role in the air and deferred delivery segments. Also, UPS is looking to
add acquisitions and compete aggressively in these segments in the future, particularly
when it comes to air delivery.
Financially, UPS maintains AAA credit ratings, which competitors such as FedEx
and USPS do not possess, and therefore cannot use this claim to attract investors.
Further, UPS consistently has a larger net income, revenues, and industry market share
22
than FedEx, which extends its financial leverage. Obviously, if one was looking to invest
in a company within this industry their finalists would most likely be either UPS or
FedEx. With the incredible amount of evidence weighing towards UPS, it seems the
logical conclusion would be to invest in UPS.
So what does all this mean when those set to decide UPS’s IPO particulars sit
down to discuss the situation? Well, based on the evidence presented and readily
available to potential investors, anything less than a premium best-of-breed price would
be unacceptable. A price range that we suggest could be $48-$54. UPS would soon set
themselves apart from the competition with the largest IPO ever.
23
Income Statement comparison: selected figures(1997-1998-1999)
*amounts in millions, except per
share amounts Federal Express
United Parcel Service
Federal Express
United Parcel Service
Federal Express
United Parcel Service
1999 1999 1998 1998 1997 1997 Revenues $16,773 $26,872 $15,873 $24,596 $14,238 $22,458
Operating Expenses $15,610 $22,967 $14,862 $21,593 $13,731 $20,815 Operating Income $1,163 $3,905 $1,011 $3,003 $507 $1,643
Other Income (expense) -$102 -$1,817 -$111 -$101 -$81 -$90 Income from Continuing
Operations $631 $2,088 $498 $2,902 $196 $1,553
Net of Income Taxes $0 $1,205 $5 $1,161 $0 $644 Net Income $631 $883 $503 $1,741 $196 $909
Earnings Per Common Share $2.13 $0.79 $1.72 $1.59 $0.67 $0.82
Diluted Earnings Per Share $2.10 $0.77 $1.69 $1.57 $0.67 $0.81
• Excel document produced with figures from Healy Case and UPS.com