UPS vs FDX

Discussion in 'UPS Discussions' started by moreluck, Oct 28, 2005.

  1. moreluck

    moreluck golden ticket member

    Excerpt from Morningstar article (Oct. 28) by Pat Dorsey CFA.

    FedEx (NYSE:FDX - News) and United Parcel Service (NYSE:UPS - News) also help illustrate where we draw the line. Although they look similar on the surface, UPS typically posts ROICs in the 15% range, which we think will improve to 20% in time, while FedEx has been posting high-single-digit returns on capital that we're projecting to only improve to a bit more than 11%. One reason for this is that planes make up a bigger portion of FedEx's capital base, and planes are more-expensive (and less productive) assets than the ubiquitous brown trucks that comprise a big chunk of UPS' invested capital. Second, a larger portion of FedEx's business comes from overnight/time-sensitive package delivery, which is a more competitive market than the residential package delivery that's UPS' bread and butter. The bottom line is that UPS delivers way more packages with a similar asset base than FedEx, which makes UPS a more attractive business.