Investeringsanalyse, Keith Schoonmaker, CFA, 30/01/2014
UPS is the colossus among global parcel shipment companies, and we consider its economic moat to be the widest among all freight transportation firms. The company crafted its moat by assembling an integrated global shipping network that's unlikely to be matched by any but a few global players. Despite its extensive unionization and asset intensity, UPS produces returns on invested capital about double its cost of capital and margins well above its competitors'; we credit the firm's leading package density and outstanding operational efficiency, enhanced by extensive technology investment. UPS and its competitors have turned to Asia and developing nations for growth, and we think UPS has ample runway left to build speed. Even existing operations have revenue expansion potential via pricing power, because UPS operates as a rational duopoly in its largest market, U.S. high-service parcel delivery.
UPS earns higher margins than its peers, by its mix (FedEx has expanded ground operations, but still earns a majority of its revenue in its low-margin express segment) and by funneling substantially greater package volume through its efficient assets. In the U.S. parcel market, FedEx's express and ground units together handled about 8.8 million average parcels daily in fiscal 2013, but UPS moved 14.4 million in calendar 2013. Within this total, the disparity is even greater in U.S. ground, where UPS moved on average 12.1 million parcels per day and FedEx about half of that: 6.3 million including SmartPost. Another aspect of UPS' margin advantage lies in its use of integrated assets to transport U.S. urgent and ground shipments through the same pickup and delivery network. In contrast, FedEx uses parallel networks of drivers and trucks to separately handle ground and express shipping. In addition to the greater efficiency of UPS' single system, clients appreciate the convenience of using the same driver to handle both express and ground packages.
Læs den fulde analyse af UPS her.
Bull og Bear scenarier for UPS
Bulls say
- UPS is the largest player in a business where network size matters, both in reaching the most recipients on the planet and in spreading costs over a larger volume of packages.
- In addition to volume growth, the firm benefits from steadily increasing prices because UPS and other integrated shippers practice rational pricing.
- In addition to handling greater parcel density, UPS uses many of its assets to handle both express and ground shipments, earning greater margins compared with other parcel shippers.
Bears say
- Mix is increasingly B2C for online shopping fulfillment, and we believe this will continue to grow. We think these packages are higher cost to deliver than B2B shipments due to lighter weight, fewer packages per stop, and more missed/redeliveries.
- New entrants are unlikely, but several existing competitors vie for the parcel business of UPS clients. The European parcel delivery market is particularly fragmented.
- UPS' less-than-truckload segment (about 5% of revenue) exposes the firm to a market in which slowing demand leads many competitors to bid rates down to break-even margins.
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