Here’s How FedEx’s Valuation Compares To UPS

by Trefis Team
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FedEx Corporation’s (NYSE: FDX) market cap is much lower than that of UPS. The stock also has fallen over 15% in September, amid lower than expected quarterly performance. FedEx’s revenue growth has been higher on average in recent years, but that can be attributed to the impact of the TNT acquisition. FedEx’s P/E Multiple is lower than that of UPS, given its recent fall in stock price, and end of its contract with Amazon for ground shipping. Overall, it appears that UPS is better placed for upside growth in the near term, when compared to FedEx.  You can look at our interactive dashboard analysis ~ FDX Valuation: How Does FedEx Corporation’s Valuation Compare To Its Peers? ~ for more details. In addition, you can see more of our data for industrial companies here.

Current Market Cap:

  • FedEx: $37.8 Bil
  • UPS:     $83.1 Bil

FedEx’s Price To Earnings Multiple Is Lower Than That of UPS, As Well As Broader S&P 500 Index, On Average Consensus Earnings Estimate For Current Year (Fiscal).

  • FedEx’s P/E Multiple of 12x is lower than UPS’ 16x, and the broader S&P 500 Index’s 22x.
  • The reason for lower multiple for FedEx can be attributed to its recent quarter earnings, which were below street estimates, and the company cut its guidance for fiscal 2020, amid trade tensions. As such, the stock price has plummeted around 15% since then, resulting in a lower multiple.
  • More importantly, FedEx ended its ground shipping contract with Amazon, while UPS is still on-board with the e-commerce giant.
  • UPS’ stock hasn’t seen such a fall, and it appears markets are pricing in better performance for UPS over FedEx in the near term, especially since it continues its ties with Amazon.

FedEx’s Revenue Grew At A Faster Pace Over The Last Three Years, When Compared To That of UPS.

  • FedEx’s revenues grew at an average annual rate of 12% over the last three fiscals. Much of this growth came in fiscal 2017, when revenues were up 20% y-o-y, due to FedEx’s acquisition of TNT in 2016.
  • This compares with an average annual growth rate of 7% for UPS.
  • If we ignore TNT revenues for 2017, the revenue growth for FedEx would have been 5.1% in 2017.

While FedEx’s EBITDA Margins Are Slightly Better Than That of UPS, Its Adjusted Net Income Margin Is Comparatively Lower.

  • Both FedEx and UPS have seen a decline in EBITDA margins over the last three years (fiscals), as operating expenses grew at a faster pace than the company’s revenues.
  • FedEx’s EBITDA margin declined from 20.8% in fiscal 2017 to 16.3% in fiscal 2019.
  • FedEx’s margins were a little higher than that of UPS.
  • UPS’ EBITDA margin declined from 18.4% in 2016 to 14.9% in 2018.

  • Looking at adjusted net income margin, FedEx saw a slight decline from 6.2% in fiscal 2017 to 5.9% in fiscal 2019, and this was lower than the margins for UPS.
  • UPS’ net income margin actually grew slightly from 8.4% in 2016 to 8.8% in 2018.

 

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