UPS vs. FDX

[UPSer21]

Here is a little glimpse into a comparison I've started doing between our big brown, and FedEx. I collected the following information using Yahoo Fiance which allows you to look at the daily volume totals for both companies.

11/12/09
UPS total volume = 5,331,336
Avg. volume = 4,315,130
23.5% above average

FDX total volume = 2,516,568
Avg. volume = 3,145,000
19.9% below average


11/13/09
UPS total volume = 4,447,204
Avg. volume = 4,322,100
2.89% above average

FDX total volume = 1,938,698
Avg. volume = 3,137,270
38.21% below average




I will be continuing the observation throughout the peak season. It looks that if Fed Ex has to stop hiding beneath the Railway Labor Act, and unionize its workforce... they will be walking right into their grave. I'm not sure they could afford to have a Teamsters contract that give raises at a specific rate, and also at the same time protect certain employees that are causing more harm than good to an already struggling company when compared to UPS. There will also be the occasional grievance filed, and more.

Also interesting: https://web.archive.org/web/20090209225326/http://fedexwatch.com/

 

[brownmonster]

Volume?

 

[an anonymous guest]

I don't know where you get your numbers but if we are at 5 million a day we are in trouble. I think our average daily volume used to be 12 million.

I believe those are the number of shares traded on those days, not package volume. Yahoo Finance tracks only financial data...

Go UPS!
P71

 

[upsgrunt]

Maybe the problem is you looked on Yahoo fiance.

 

[clueless]

I believe those are the number of shares traded on those days, not package volume. Yahoo Finance tracks only financial data...

Go UPS!
P71

LOL!! Yikes! I hope the OP was joking! Of course the Yahoo data refers to shares traded, not to packages processed. It gives traders an idea of the conviction behind a move in the stock price (higher volume means more conviction). Bring up the ticker symbol for any company--it shows the same metric.

 

[I GOT ONE MORE]

There is one metric catching my attention.

A coworker and I were discussing companies that were run debt free. Having very little or no debt allows a company or a person, for that matter, to make very different decisions.

Microsoft (MSFT) and Texas Instruments (TXN) were mentioned. Along with FDX an UPS.

To my surprise, UPS debt/equity ratio blew me away. Frankly, upper management must be very smart or very stupid. UPS has such a heavy flow of cash each day that financing anything seems like folly. Refer to the following brief definition of debt/equity ratio.

A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt. For example, if a company has long-term debt of $3,000 and shareholder's equity of $12,000, then the debt/equity ratio would be 3000 divided by 12000 = 0.25. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.

Debt/Equity Ratio

MSFT 0.15
TXN 0.00
FDX 0.15
UPS 1.48
AIG 2.38

I had no idea. But, I do now from a little digging. That's another thread.

 

[Brown287]

There is one metric catching my attention.

A coworker and I were discussing companies that were run debt free. Having very little or no debt allows a company or a person, for that matter, to make very different decisions.

Microsoft (MSFT) and Texas Instruments (TXN) were mentioned. Along with FDX an UPS.

To my surprise, UPS debt/equity ratio blew me away. Frankly, upper management must be very smart or very stupid. UPS has such a heavy flow of cash each day that financing anything seems like folly. Refer to the following brief definition of debt/equity ratio.

A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt. For example, if a company has long-term debt of $3,000 and shareholder's equity of $12,000, then the debt/equity ratio would be 3000 divided by 12000 = 0.25. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.

Debt/Equity Ratio

MSFT 0.15
TXN 0.00
FDX 0.15
UPS 1.48
AIG 2.38

I had no idea. But, I do now from a little digging. That's another thread.

The sad thing is you can attribute this directly to baleing out the Central States Pension fund to the tune of 5 Billion dollars. Not only was this the result but also UPS loss thier AAA credit rating. Ironically enough though UPS and FDX now have the same credit rating. So yes untill this is paid in full the company will suffer. Now again what was the strike of 96 over?

 

[clueless]

There is one metric catching my attention.

A coworker and I were discussing companies that were run debt free. Having very little or no debt allows a company or a person, for that matter, to make very different decisions.

Microsoft (MSFT) and Texas Instruments (TXN) were mentioned. Along with FDX an UPS.

To my surprise, UPS debt/equity ratio blew me away. Frankly, upper management must be very smart or very stupid. UPS has such a heavy flow of cash each day that financing anything seems like folly. Refer to the following brief definition of debt/equity ratio.

A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt. For example, if a company has long-term debt of $3,000 and shareholder's equity of $12,000, then the debt/equity ratio would be 3000 divided by 12000 = 0.25. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.

Debt/Equity Ratio

MSFT 0.15
TXN 0.00
FDX 0.15
UPS 1.48
AIG 2.38

I had no idea. But, I do now from a little digging. That's another thread.

The high degree of leverage relative to the other companies you listed is interesting, however keep in mind the appropriate amount of debt-financing to some extent depends upon the industry in which the companies operate. Assuming your numbers are accurate, the debt to total asset ratio of UPS would be approximately 60% (total assets would = E + 1.48 E= 2.48E, where E=Equity and Debt = 1.48E). The average for the air transport industry is approximately 55%, making UPS slightly higher than the industry average (granted, it is also one of the components, skewing the results somewhat). Based on the same principle, Microsoft's debt to total asset ratio would be 13% whereas the industry average for its industry (computer software/services) is 15%.

Comparing the debt ratio of UPS to that of Microsoft is a bit like comparing apples to oranges, given the different natures of the industries.

Btw--the industry average data was from the most recent data set on this site and is based upon the Value Line database.

http://pages.stern.nyu.edu/~adamodar/

Also, note that UPS' designated industry (if you download the source data) is 'air transport,' not 'trucking.' FedEx is also listed as a component of the 'air transport' industry, in case you're wondering.

In any case, thanks for pointing the high debt ratio out--I had no idea that UPS was so highly leveraged. The reason that could be problematic is that when the debt rolls-over and requires refinancing, the interest rates will undoubtedly be higher than they are now, increasing the cost-of-capital.

 

[I GOT ONE MORE]

The high degree of leverage relative to the other companies you listed is interesting, however keep in mind the appropriate amount of debt-financing to some extent depends upon the industry in which the companies operate. Assuming your numbers are accurate, the debt to total asset ratio of UPS would be approximately 60% (total assets would = E + 1.48 E= 2.48E, where E=Equity and Debt = 1.48E). The average for the air transport industry is approximately 55%, making UPS slightly higher than the industry average (granted, it is also one of the components, skewing the results somewhat). Based on the same principle, Microsoft's debt to total asset ratio would be 13% whereas the industry average for its industry (computer software/services) is 15%.

Comparing the debt ratio of UPS to that of Microsoft is a bit like comparing apples to oranges, given the different natures of the industries.

Btw--the industry average data was from the most recent data set on this site and is based upon the Value Line database.

http://pages.stern.nyu.edu/~adamodar/

Also, note that UPS' designated industry (if you download the source data) is 'air transport,' not 'trucking.' FedEx is also listed as a component of the 'air transport' industry, in case you're wondering.

In any case, thanks for pointing the high debt ratio out--I had no idea that UPS was so highly leveraged. The reason that could be problematic is that when the debt rolls-over and requires refinancing, the interest rates will undoubtedly be higher than they are now, increasing the cost-of-capital.

You are very right about apples and oranges. Industries have their respective average and are different. Notable is the comparison between UPS and FDX, however.

And, as brown 287 points out, the Central States pension buyout which was actually 6.1 billion, coupled with the following link indicating 4 billion more in debt offerings, leaves me wondering if our management is straying from the conservative, pay as you go, ways of James Casey.

http://www.cfo.com/article.cfm/10518620/c_10518123?friend=TodayInFinance_Inside

Leverage caused the lions share of the current economic woes.

Again, I'm surprised and bewildered about learning this and it has me scratching my head.... but I had an itch anyway and I am just a driver.

 

[Dis-organized Labor]

If you waste your time on the YAHOO Message Boards (like I do), you will question the long term viability of UPS. I work here, I can't say I love it, bit I have all my eggs in a Brown Basket. I think I'll continue that strategy.

 

[IWorkAsDirected]

The sad thing is you can attribute this directly to baleing out the Central States Pension fund to the tune of 5 Billion dollars. Not only was this the result but also UPS loss thier AAA credit rating. Ironically enough though UPS and FDX now have the same credit rating. So yes untill this is paid in full the company will suffer. Now again what was the strike of 96 over?

We did NOT want a company pension, so glad they did not get it. They just wanted the money (western states is almost fully funded) to buy foreign companies and planes. ( Can you say Enron, Bell, etc) So......they went public to raise the money, and possibly accrued part of that debt also.

 

[MrFedEx]

Hey Satellite Driver. Is it OK if I respond to this thread, or are you going to get your panties in a knot? I'll guess it's OK, and then wait for you to slap me down (as usual) for daring to cross-over into "your" forum.

Historically, UPS has been cash-rich and FedEx cash-poor. We have to finance it while UPS just pulls-out the checkbook. This is amazing, because everyone "knows" that a heavily unionized company can't possibly succeed while paying excellent wages and benefits....it just can't be done. Maybe it's because one company is much better managed than the other one and those "lazy" Teamster workers are actually extremely productive. Nah...that can't be it.

 

[clueless]

You are very right about apples and oranges. Industries have their respective average and are different. Notable is the comparison between UPS and FDX, however.

And, as brown 287 points out, the Central States pension buyout which was actually 6.1 billion, coupled with the following link indicating 4 billion more in debt offerings, leaves me wondering if our management is straying from the conservative, pay as you go, ways of James Casey.

http://www.cfo.com/article.cfm/10518620/c_10518123?friend=TodayInFinance_Inside

Leverage caused the lions share of the current economic woes.

Again, I'm surprised and bewildered about learning this and it has me scratching my head.... but I had an itch anyway and I am just a driver.

You are absolutely correct about the leverage of FDX being a more applicable comparison than one to Microsoft--it is quite a stunning difference. Sixty percent of the assets of UPS are financed via debt, whereas only 13% of FedEx's are.

btw--You're pretty sharp for being 'just a driver.'

 

[Brown287]

We did NOT want a company pension, so glad they did not get it. They just wanted the money (western states is almost fully funded) to buy foreign companies and planes. ( Can you say Enron, Bell, etc) So......they went public to raise the money, and possibly accrued part of that debt also.

I choose to disagree with your assumtion of why UPS wanted control of the pension. If you recall that only a few years earlier the Teamsters had just gotten control of thier books back from the government due to thier mis-management of thier finances. How ever with this all said we should quickly point out the global expansion that UPS has undertaken since the IPO. This all cost money and you cant ignore the finale tally that will be put upon FDX when thier IRS problems are finally drawn out.

 

[Brown287]

You are absolutely correct about the leverage of FDX being a more applicable comparison than one to Microsoft--it is quite a stunning difference. Sixty percent of the assets of UPS are financed via debt, whereas only 13% of FedEx's are.

btw--You're pretty sharp for being 'just a driver.'

Around 2000 there was an article in Business Week about UPS and FDX and thier differences. Among the things they discussed in the article, like the cost per package to deliver a package, and at that time are cost was half of the expense that FDX was. They also described UPS as a "cash cow". You see they said that UPS can borrow money at a smaller interest then they recieve from keeping thier liquid cash in savings. Simply put it actually cost UPS money to spend thier own money versus borowing someone elses money. I wish I knew the excact date the article came out, but it was quite an intersting read, and quite informative.

 

[I GOT ONE MORE]

I choose to disagree with your assumtion of why UPS wanted control of the pension. If you recall that only a few years earlier the Teamsters had just gotten control of thier books back from the government due to thier mis-management of thier finances. How ever with this all said we should quickly point out the global expansion that UPS has undertaken since the IPO. This all cost money and you cant ignore the finale tally that will be put upon FDX when thier IRS problems are finally drawn out.

I know your disagreement is not with me, please let me contribute.

IMO, UPS wanted control of THAT pension for a simple reason, based on history.

UPS history, which is, BTW, a very good history.

UPS started over century ago and I won't bore everyone, but UPS took over this country,.. one zip, one county, one state, one region at a time.

One money sucking pension plan down...... and after the ten year stipulation, or whatever it is, runs out well, NEXT.

And I say good for them/us, UPS is far more likely to run a solvent pension plan for UPSers than funding a MEPP (multi employer pension plan).

ASSuming, UPS knows what this debt leverage thing is gonna do for em!

BTW, remember OPL. There is an example of corporate America trying to skirt taxes.

I'm wondering......now? When will our metroplex elaborate?

 

[I GOT ONE MORE]

Around 2000 there was an article in Business Week about UPS and FDX and thier differences. Among the things they discussed in the article, like the cost per package to deliver a package, and at that time are cost was half of the expense that FDX was. They also described UPS as a "cash cow". You see they said that UPS can borrow money at a smaller interest then they recieve from keeping thier liquid cash in savings. Simply put it actually cost UPS money to spend thier own money versus borowing someone elses money. I wish I knew the excact date the article came out, but it was quite an intersting read, and quite informative.

That could be an interesting read.

I am of the mindset, however, that no debt brings the level of RISK to zero.
If you owe no one, you answer to no one.
I carry this philosophy in my personal life.
One cannot imagine this strength, unless you have no payments.
I realize UPS is big and complicated and successful and has lots of money.
BUT, right now, UPS has notable payments and its strength is weakened.

 

[BLACKBOX]

This all cost money and you cant ignore the finale tally that will be put upon FDX when thier IRS problems are finally drawn out.

The IRS just announced they would not be auditing FDX concerning penalties and assessments from their use of contractors. How the IRS could just drop the whole investigation which would have totaled in the millions of dollars is beyond reason.

Fred S must have done something extra-ordinary to make this situation go away.

 

[klein]

That could be an interesting read.

I am of the mindset, however, that no debt brings the level of RISK to zero.
If you owe no one, you answer to no one.
I carry this philosophy in my personal life.
One cannot imagine this strength, unless you have no payments.
I realize UPS is big and complicated and successful and has lots of money.
BUT, right now, UPS has notable payments and its strength is weakened.

Besides, borrowing money with an AAA credit rating is much cheaper, then now to it's downsized AA- one, or AA+ whatever it is.
Which comes with higher interest rates.

But, atleast one thing came good out of this thread.
Now, we all know why FDX outperforms UPS on Wallstreet.

 

[UpstateNYUPSer(Ret)]

The IRS just announced they would not be auditing FDX concerning penalties and assessments from their use of contractors. How the IRS could just drop the whole investigation which would have totaled in the millions of dollars is beyond reason.

This was only for one fiscal year. The issue is far from being resolved.