Fedex Corp. Versus United Parcel Service of America, Inc.: Who Will Deliver Returns from China?

14 Pages Posted: 5 Apr 2010

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Sean Carr

University of Virginia - Darden School of Business

Abstract

In early 2006, the anticipated expansion of package delivery services in China provided a great opportunity for the two package delivery giants FedEx and UPS. It was unclear which of these firms would make the most of this opportunity. An analysis of financial performance suggests that UPS is the better performer. On the other hand, the FedEx stock price performance has been far stronger. This apparent conflict highlights the fact that stock prices reflect anticipated future performance and new information. A teaching note and instructor and student spreadsheets are available.

Excerpt

UVA-F-1601

Rev. Sept. 7, 2011

FedEx Corp. versus United Parcel Service of America, Inc.:

Who Will Deliver Returns from China?

On April 17, 2006, the International Air Cargo Association hosted its first-ever meeting in China. The location could not have been more appropriate. China was shaping up to be the world's most significant market for air cargo, and Yan Yuanyuan, director general of China's General Administration of Civil Aviation, had just announced that China would be opening up its air cargo market to an even greater degree. The major global cargo companies had been picking up their level of investment in China and were poised for growth: FedEx Corp. had just begun construction of a major regional hub in Guangzhou and already had over 200 Chinese cities in its international network, and United Parcel Service of America, Inc. (UPS), was just completing a new logistics hub in Shanghai and had recently begun domestic Chinese express package services. The question on the minds of many was which of these two cargo giants was going to make the most of this opportunity.

Spurred in part by entry into the World Trade Organization in 2001, growth in trade with China had accelerated and the need for cargo shipment and logistics support had skyrocketed. On June 18, 2004, the United States and China reached a landmark air-transportation agreement that quintupled the number of commercial cargo flights between the two countries. The agreement also allowed for the establishment of air-cargo hubs in China and landing rights for commercial airlines at any available airport. The pact represented the most dramatic liberalization of air traffic in the history of the two nations.

. . .

Keywords: value creation stock price financial ratios

Suggested Citation

Bruner, Robert F. and Carr, Sean, Fedex Corp. Versus United Parcel Service of America, Inc.: Who Will Deliver Returns from China?. Darden Case No. UVA-F-1601, Available at SSRN: https://ssrn.com/abstract=1583752

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-3823 (Phone)
434-924-0714 (Fax)

HOME PAGE: http://faculty.darden.edu/brunerb/

Sean Carr

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4812 (Phone)

HOME PAGE: http://www.batteninstitute.org

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