FedEx vs UPS and Their Methods

FedEx Financials

The author of this report has been charged with doing a review and summary of the financial state of FedEx and their package shipment operations. Per the given parameters of the assignment, the included metrics and facts that will be included will be a summation of the airline's current status, an analysis of the firm's current financial performance, recommended courses of action that FedEx should take to be more profitable and the predicted status or performance of the company as the coming years arrive and then pass. While FedEx faces competition from firms or organizations like UPS and USPS, FedEx is really doing quite well for itself but they could be even better.

As indicated in the introduction, FedEx only has two competitors to speak of, those being USPS and UPS. Of course, there are other competitors that exist when it comes to FedEx's international operations. However, the United States shipping landscape is fairly clean and simple. FedEx and UPS have about the same number of employees, both of the having about a quarter million each. However, UPS is most definitely ahead of FedEx when it comes to revenue. UPS has yearly revenue of about $58.8 billion while FedEx has about $49.5 billion. Right off the top, it is concerning that UPS is able to get much more revenue with roughly the same amount of employees (Yahoo Finance, 2016). Even more interesting is that UPS employees are part of a union and they have a very good benefits package to reflect this. By contrast, FedEx workers are not represented by a union and their benefits and wages are often much lower or lesser (Keever, 2014).

Even with those facts, FedEx is certainly not doing poorly. Their total revenue over the last three years is on an upward swing, albeit fairly muted. For the year ending May 31st, 2013, their total revenue was $44.2 billion. For the year ending in 2014, that figure rose to $45.57 billion. For 2015, it rose again to $47.45 billion. Gross profit rose at about the same clip but operating income actually fell by more than half over the same time period. It was $4.4 billion in 2013, $3.8 billion in 2014 and $1.8 billion in 2015. The main cause seems to be that Selling General and Administrative expenses are rising at a faster clip than the corresponding revenue. Current assets have bounced around a bit over the last few years and the same is true of current liabilities. Overall liabilities, on the other hand, rose fairly sharply. The total liabilities in 2013 was $16.169 billion. That figure rose slightly in 2014 to $17.793 billion and then spiked to $22.076 billion in 2015. In terms of cash flow, the news is much more mixed. The year-end figures for cash flow were offsetting for 2013 and 2014. The company gained $2 billion and change in 2013 but lost almost all of it in 2014. 2015 revealed a gain of $855 million (Yahoo Finance, 2016).

The opinions and outlooks of those in the financial sector are definitely a little confusing, however, FedEx has certainly not gone into a death spiral and they are generally meeting expectations. However, some analysts and investors are less than impressed about their overall performance. For their part, FedEx has cited problems with fuel surcharges and current exchange rates being a sap on profitability. One part of the discord that does exist, albeit minor discord, is that the analysts are often expecting more from FedEx's operations and efforts than FedEx itself is expecting. FedEx seems to have the evidence on their side given that the amount of volume they ship is going up while their revenue is flat. However, one could point to the possibility that price cuts and discounts are eating away at FedEx's revenue. Even so, it would be pretty easy for FedEx to see how many shipments they did and what the average price was per shipment. While prices charged per shipment may indeed be a problem, the volume is most certainly going up. Unless it is provable that FedEx is fudging their data, they should be taken at their word.