UPS vs FEDEX vs DHL 2012 to 2016 and beyond

In my earlier Post I had analyzed the performace of UPS , Fedex and DHL over 2012 to 2016 in terms of :

a )Financial Growth in Turnover , Gross Margin & EBIDTA

b ) Consistency in Growth Pattern ,

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

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

Now let us try and analyze what has changed over from 216 to 2017 and last five quarters


GROSS REVENUE

FedEx has been able to grow it's revenue the most i.e. 9.94 B at an overall growth of 19.73 % 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  11.81 B and an overall growth of 22 % . However in 2017 the growth was USD 35.37 Billion growing at around 8.9% over ;ast year

DHL has recorded two years of negative growth and the overall addition to it's turnover over 6 years is only USD 4.93 Billion at a overall growth of 9% thanks to the growth in turnover this year by USD 3.11 B

So all the new market leaders are now in USD 60 Billion plus bracket and it will be interesting to see how does FEDEX levergaes the buy-out of TNT which is supposed to give it not only good topline specially in markets like Europe , Asia and Africa and segements like Road where it was not so strong but also on it's profitabilty basis improving the asset utilization ( Aircrafts Own) and also margin improvemet where it was competing with TNT. 

TURNOVER ( USD BILLION)	2012	2013	2014	2015	2016	2017
UPS	54.06	55.49	58.26	58.05	60.50	65.87
DHL	55.51	55.09	56.63	59.23	57.33	60.44
FEDEX	42.68	44.29	45.57	47.45	50.37	60.31
TURNOVER ( GROWTH %)
UPS		2.65%	4.99%	-0.36%	4.22%	8.88%
DHL		-0.76%	2.80%	4.59%	-3.21%	5.42%
FEDEX		3.77%	2.89%	4.13%	6.15%	19.73%

Comparison of Turnover of Last 5 Quarters

If we look at the last five quarters the numbers do not give any distinct trend with UPS growing in 3 out of 4 quarters Q-O-Q whereas DHL showing only one positive quarter of growth and Fedex again 3 out of 4 .

However if we look at the Q1 numbers of 2018 FedEx is ahead of UPS marginally and by more than USD 2.5 Billion from DHL. Going by this trend and synergies FedEx-TNT combine should end up becoming the largest player in terms of Topline.

TURNOVER ( USD BILLION)	2017-Q1	2017-Q2	2017-Q3	2017-Q4	2018-Q1	18-Q1 VS 17Q1
UPS	15.32	15.75	15.98	18.83	17.11
DHL	14.88	14.81	14.64	16.11	14.75
FEDEX	15.73	15.30	16.31	16.53	17.31
TURNOVER ( GROWTH %)	2017-Q1	2017-Q2	2017-Q3	2017-Q4	2018-Q1	18-Q1 VS 17Q1
UPS		2.81%	1.46%	17.83%	-9.13%	11.68%
DHL		-0.47%	-1.15%	10.04%	-8.44%	-0.87%
FEDEX		-2.73%	6.60%	1.35%	4.72%	10.04%

Operating Margin

UPS is the undisputed leader in terms of operating margin and has not only maintained the same but improvd it's margin in 2017 to 11.43% from 9.04% thanks to it' super efficient management of costs , continuous price increases it is able to command basis it's services and focus on Revenue Management and also to soem extent becasue of it's large concentration in US market which is a high yiled market as compared to DHL which has a larger no US presence and FedEx which has scope to improve margins by increaisng efficiency riding on the TNT business but has to be careful in eliminating duplicating costs.

OPERATING INCOME ( USD BILLION)	2012	2013	2014	2015	2016	2017
UPS	6.08	7.03	4.97	7.67	5.47	7.53
DHL	0.56	2.82	2.95	2.15	3.34	3.61
FEDEX	3.19	2.55	3.45	2.14	3.08	5.03
UPS	11.25%	12.67%	8.53%	13.21%	9.04%	11.43%
DHL	1.01%	5.12%	5.21%	3.63%	5.83%	5.97%
FEDEX	7.47%	5.76%	7.56%	4.52%	6.11%	8.34%

EBIDTA

UPS has been able to grow it's EBIDTA from USD 1.38 Billion in 2012 to USD 9.88 Billion in 2017 which is phenomenolly a little less than six times when it's corresponding topline has grown by 220 % by approximately USD 12 Billion . So out of additional growth of USD 12 Billion they have added to costs only USD 3.4 Billion which is only 28.33% .

DHL EBIDTA has doubled over the same period with an addition of USD 2.57 billion over an addition in revenue of around USD 5 Billion which is also healthy

FedEx has reproted an EBIDTA of USD 5.09 billion in 2017 over YSD 5.71 Billion last year showing a healthy growth of 42%.

But the magic and secret of UPS is something which other players need to understand and replicate if they want to reflect the same in their stock prices and MArket Capitalization.

EBIDTA ( USD BILLION)	2012	2013	2014	2015	2016	2017
UPS	1.38	7.04	4.92	7.61	5.49	9.88
DHL	2.51	4.28	4.31	4.06	4.81	5.08
FEDEX	3.19	2.54	6.03	4.47	5.71	8.09
EBIDTA ( GROWTH %)
UPS		410.14%	-30.11%	54.67%	-27.86%	80.02%
DHL		70.52%	0.70%	-5.80%	18.47%	5.61%
FEDEX		-20.38%	137.40%	-25.87%	27.74%	41.68%

So on an overall basis if we see

1. Turnover 

Result As far as Turnover is concerned all the 3 players are in USD 60 Billion plus Category with UPS still the leader with a lead of USD 5 Billion over the other two companies but looking at the growth rate of FedEX it looks like FedEx should emerge the winner or 2020.

2. Operating Margin : 

UPS is the leader in margins at 11.43% with FedEx being number second at 8.34 % and DHL at 5.97%

Result : UPS has been able to become the leader in Operating margin both in absolute numbers and at a percentage to it's tunover basis. Now it will be interestng to see if UPS continues it's focus on " Proftable Growth" or is wiling to grow Topline so that FedEx does not take over it's number one position and sacrifice some profit focus to get mor market share specially outsde US whre it's presemce is low but with huge investments in Europe followed by China and focus in Middle East and Africa .

3. EBIDTA

EBIDTA ( USD BILLION)	2012	2013	2014	2015	2016	2017
UPS	1.38	7.04	4.92	7.61	5.49	9.88
DHL	2.51	4.28	4.31	4.06	4.81	5.08
FEDEX	3.19	2.54	6.03	4.47	5.71	8.09
UPS	2.55%	12.69%	8.44%	13.11%	9.07%	15.00%
DHL	4.52%	7.77%	7.61%	6.85%	8.39%	8.41%
FEDEX	7.47%	5.73%	13.23%	9.42%	11.34%	13.41%

EBIDTA margins also thanks to higher Operatng Margins and control on SG&A UPS has imprved it;s EBIDTA MArgin to 15 % from 9 % last year .

However DHL margins have not improved which needs introspection althoigh they have a large presence in non US market .

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FedEx has been improving its EBIDTA and margins consistenty over the last 2 years after a dip in 2015 and it should improve further .

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 6 years which is a refelction of increase in Cross Border Trade . However with the new political and commercial scenarios of sanctions put by the US Government on China majorly and also on Russia and other countires in Asia inclsuing India and Japan and their counter sanctions there may be a dip in volumes specially from no US to SU countires and all the 3 players have to focus on other growing lanes specually Inter Asai , Asis - Africa , South Asia - Middle East etc.

Another fear which looks like is taming down was Amazon startng its own logistics but it would not be easy and with the network realted moats that tehse behemoths enjoy they would still be much more competitive if Amazon tries to do it on its own except for Full Load from their Manufactures to their Mother Warehosues where they make get better pricing and eliminate margins of Logistics .

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

" PROFITABLE GROWTH "  and   " SUSTAINABLE PROFITABILITY " but with a caution that they need to focus on sales as otherwise they may lose their number one position.

MARKET PERCEPTION

The market  values UPS as the most valuable of the three companies with an PE of 20.86 and EBIDTA/Mcap of 9.52% and Turnover / Mcap of 63/48%

Fedex is at a P/E pf 13.27 but if it contimues to grow its topline and keep it;s focus the what it is doing now ther would be a re-rating of the stock in near future .

PARTICULARS	UPS	FEDEX	DHL
Turnover	65.872	60.31	60.44
Gross Income	7.53	5.03	3.61
EBIDTA	9.88	8.09	5.08
MCAP	103.77	65.38	43.09
PE	20.86	13.27	14.06
EBIDTA/MCAP	9.52%	12.37%	11.79%
TURNOVER/MCAP	63.48%	92.25%	140.26%

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