MGT 335

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Samy Hacein-Bey

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Kareem Powell

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Saeed Pirouzian

Valuation Project

December 7^th, 2022

Recommendation

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Recommendation - Strong Buy

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Target Price Range: $200 - $268

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Current Share Price: $176.60

Selected Financials

• Key cost-cutting plan laid out, targeting nearly $2.5 Billion in cost savings for FY2023. 

• Parking planes in order to reduce fuel costs, thus reducing flight frequency and efficiency.

• Large rate increase of nearly 6.9% at Express and Ground, to combat inflation and increase margins.

Company Background and Industry

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Company Profile

Internationally renowned Transportation and Logistics

Company that delivers packages and Freight both

internationally and domestically.

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Market Value at $45.03 billion in 2021.

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Industry Analysis

• The Global Courier Services Market was valued at $381 billion in 2021 with a projected compound growth rate of 5.7%.

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• FedEx’s main competitors include the United Postal Service (UPS) and Deutsche Holdings Limited (DHL). Other competitors include DB Schenker, DSV A/S, Nippon Express Co., Singapore Post Limited, and Yamato Transport Company Ltd.

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• Recent Industry Trends: 
• Greater demands for eCommerce Fulfillment
• Increase in demand for same-day delivery
• Increase in the use of technology to provide customized solutions.

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Competitor Strategies

• Strong Presence in the U.S., European, and Asian Market.

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• Able to offer a wider range of services due to acquisitions and takeovers.

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• Has a competitive advantage over rivals due to its size, and innovative culture.

• Strong Presence in the North American Market.

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• Undertakes various efforts to aid in customer retention and sustainability allowing the company to have a higher customer satisfaction rate than many of its competitors.

• Strong Presence in Europe, notably Asia

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• Consistent and steady growth in developing countries.

SWOT Analysis

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SWOT Analysis - Strengths

• Able to guarantee delivery promises due to transportation

and logistical services.

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• Strategically acquires companies that offer specialized

Services that contribute to global distribution.

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• Extensive market research to identify potential markets

within previously undiscovered territories.

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• Titles such as “100 Best Companies to Work For” and “World’s Most Admired Corporations”

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SWOT Analysis - Strengths

• Excellent marketing: through which the company can appeal to a global demographic

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• Competitive employee compensation and employee training.

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• Globally recognized work culture.

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• Offers timely deliveries.

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SWOT Analysis - Weaknesses

• High cost for expanding fixed infrastructure globally.

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• Increased competition in the market for distributing heavy goods.

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• Over-reliance on the US market. $47.5 Billion out of $69.69 Billion comes from the US market.

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SWOT Analysis - Opportunities

• Extensive global network – Potential to expand into additional sectors. For example, The Online Retail Sector.

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• Ability to continue to acquire small and medium couriers to expand its current market demographic.

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• Innovative Services. With the establishment of multiple research centers, FedEx is currently poised to consistently create new customer solutions.

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SWOT Analysis - Threats

• Highly competitive market. Increased competition from UPS and DHL will lead to long-term sustainability challenges.

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• Varying or unstable fuel prices.

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• Possible Global Recession may impact current business products and services.

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Ratio Analysis

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DuPont Identity

Ratio Analysis

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• Profit Margin:�   Retirement plans changed in 2020�   Increasing revenue between 2020-2022�   About lowest gas price in April 2019

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• Return on Equity:

      Slight steady upward trend for ROE�      Strongly higher ROE than UPS

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Ground Avg Daily Package 000s

U.S Domestic Avg Daily Package 000s

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U.S Airfreight Avg Daily Package 000s

U.S Ground Revenue per Package

U.S Domestic Revenue per Package

U.S Airfreight revenue per Package

Total Avg Daily volume Package 000s

Industry Specific Ratios

Ratio Analysis

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• Average Daily Package

Consistence lower Average Daily package comparing with UPS�Higher Revenue Per package ���Highly focused on Airplanes

FedEx focus on special clients, UPS target Retails.���Total revenue for FedEx in 2022 is about 95 Billion, while for UPS is 102 Billion.

��

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Average Daily Package 000s

Domestic Revenue per Package

International Revenue per Package 

Valuation

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Valuation

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Revenue and EBITDA growth assumptions for the next 5 years

We are assuming revenue growth will slow in the immediate future but continue to rise as the economy cools off.

EBITDA margins are expected to remain steady at a 12% CAGR.

Valuation

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FedEx’s historical effective tax rate: 21.9%

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The risk-free rate, 10 yr. treasury yield as of 12/5/2022.

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Sensitivity Analyses

Price Range

$169.03 – $383.16

Our Assessment of Current Fair Price

$242.34

Multiples Valuation

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EV/ EBITDA

Average

7.98x

11,446

EBITDA

Next year assumptions

Price Range

$215.71 – $479.85

Recap

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• We believe FedEx offers a good growth opportunity for your portfolio.

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• The logistics industry has a substantial potential upside, with demand for shipping will remain strong in the long-term.

Current share price,

$176.60

Q&A

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Thank you for your time!

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