Financial Performance of UPS, DHL & FedEx over 2012 to 2016

Performance of the three biggest players in the Express & Logistics Business in the world in terms of

Financial Growth in Turnover , Gross Margin & EBIDTA

Consistency in Growth Pattern ,

Improvement in Gross Margin as a percentage of Sales and it's pattern

Improvement in EBIDTA Margin as a percentage of Sales and it's pattern


GROSS REVENUE

FedEx has been able to grow it's revenue the most i.e. 7.69 B at an overall growth of 18.02 % and has shown a growth every year .

UPS had a negative growth one year in 2015 but still managed to have a growth of USD 6.44 B and an overall growth of 11.91 %

DHL has recorded two years of negative growth and the overall addition to it's turnover over 5 years is only USD 2 Billion at a overall growth of 3.2 %.

The Gap between UPS and DHL as a result has come from USD 8 Billion to less than USD 4 Billion now

GROSS MARGIN(  after reducing the Cost of Goods Sold including the Depreciation & Amortization Expenses )

UPS has been able to improve it's gross margin by 151 point from 11.25 % to 12.76 % 

DHL has also improved it's margin percentage to 6.5 %

FedEx is having a margin of 28.71 % but the SG&A cost is eating away it's operating margin leaving too less as residual for EBIDTA.

EBIDTA

As compared to UPS FedEx margin actually reduced by 137 basis points and it's overall EBIDTA also fell by 0.11B ( mainly on account of very high SG&A expenses ( around USD 8 B each year in 2015 and 2016 ) 

DHL was able to marginally improve its EBIDTA by USD 1 B and margin also by 1.4 %.

UPS has grown it's EBIDTA from 1.38B to USD 5.59B and EBIDTA(%) to Revenue from 2.55 % to 9.07 %.

By doing so it has become the leader among the 3 companies in both EBIDTA and EBIDTA (%) in 2016 from the last ranked in 2012 which is a commendable task.

So on an overall basis if we see

1. UPS was able to grow the turnover by 12 % ( approx.) ending at 60B .FedEx grew to USD 50B by growing over 8% over 5 years but DHL was able to grow very marginally by 2 Billion at 3%.

Result : The major outcome was UPS closing the gap between it and DHL to less than USD 4 B which looks a brilliant execution of a strategy to attain the number one position by 2020

2. Gross Margin : FedEx has the strongest margin of 28%  due to higher mix of express business but has a very high SG&A spend diluting the benefit

UPS is again not the leader but has improved the margins and closing the gap with the leader in Margin i.e. FedEx

DHL has a low margin of  7%

In terms of absolute quantum FedEx GM is USD 14.5 and for UPS it is 7.72 but if we reduce SG&A and other expenses then FedEx Operating Income is USD 3 Billion and that of UPS is 5.7 B in 2016 and DHL USD 3.6 B

So under the revised scenario UPS has the Highest Gross Margin of USD 5,7 B and Margin % of 9.4% whereas FedEx revised is 6% and DHL is 3.6B at 5.6%

Result : UPS has been able to become the leader in Gross Margin at USD 5.7 B at a margin percentage to revenue of 9.4 %

3. EBIDTA

FedEx margin has reduced by 137 basis points and it's overall EBIDTA also fell by 0.11B ( mainly on account of very high SG&A expenses ( around USD 8 B each year in 2015 and 2016 ) 

DHL has been able marginally improve its EBIDTA by USD 1 B and margin also by 1.4 %.

UPS has earned a EBIDTA of 5.48 B at a EBIDTA % of 9.48 % in 2016 showing a strong growth over 2012.

Result : UPS has improved it's positon from 3 to No 1 in 2016 in EBIDTA and EBIDTA % both 

Conclusion

All the 3 players have been able to grow their top line over the last 5 years and as far as EBIDTA is concerned FedEx has been losing ground due to E Commerce like Amazon business and others

However UPS has been able to improve its margin despite serving E comm thanks to its better mix of customers .

DHL has a higher revenue which has not grown in the last five years though there is a focus on improving  profitability 

On a overall basis however UPS looks to have a god Strategy of 

" PROFITABLE GROWTH "  &  " SUSTAINABLE PROFITABILITY "

which the company has been able to successfully execute and got the following results

a ) Grow the Turnover to USD 60B ( Growth of 12 %)

b) Gross Margin to USD 7.72B 

c) Gross Margin of 12.76% ( Improvement of 150 basis points) 

c) EBIDTA of USD 5.48B ( 3.5 times )

d) EBIDTA Margin of 9.07 % ( more than 350%)

MARKET PERCEPTION

The market also values UPS as the most valuable of the three companies with an EBIDTA/MCAP of 5.92 % and Turnover / Mcap of 64.56 % which means that the expectations of growth from UPS as compared to other is more 

PARTICULARS	UPS	FEDEX	DHL
Turnover	60	50	64
EBIDTA	5.5	3	3.5
MCAP	92.94	52.35	43.92
PE	27.09	27.52	15.42
EBIDTA/MCAP	5.92%	5.73%	7.97%
TURNOVER/MCAP	64.56%	95.51%	145.74%

Note :

The numbers for DHL has been converted from Euro to USD

Disclaimer

These views are my personal views and I have not been influenced by any  of past or present occupations or relationship with any of these organizations nor myself or any of my clients hold any shares in any of these companies