Case ID: 103015
Solution ID: 3282
Words: 1996
Price $ 75

United Parcel Services IPO Case Solution

Case Solution

UPS, an employee-owned firm, is the largest parcel company in the world and generated an annual profit of $1.7 billion in 1999. UPS has to be known for its stable financial performance and excellent customer service. UPS has expanded its geographical scope as well as its technological capabilities in order to stay ahead of its competitors. It is questionable whether UPS will be able to sustain the growth in the coming years given the decrease in growth of the delivery industry.  In 1999, UPS announced an IPO of 109 million shares. Therefore, valuation of UPS Stock became a critical decision for the firm. The valuation of UPS IPO is based on its comparison with FedEx or on Best of Breed basis. Therefore, the stock value is $17,520 million and $30,415 Million based on the market capitalization using the stock price and other multiples of FedEx shares. 

Excel Calculations

Comparison of UPS and FedEx 1998 financial performance

Operating Lease Present Value

  NPV -1999-2004

Best-of-Breed valuation

Stock Price, Market Cap, Net Income, ROE, Price to Earning, Market to book

Questions Covered

What are the key success factors and risks for UPS given its business strategy?

How is UPS performing?  What factors are driving this performance?  Is the current performance likely to be sustained?  Why or why not?

How is FedEx performing?  How, if at all, does its performance and plans affect your assessment of the sustainability of UPS=s current performance?

Given your assessment of the company=s strategy and the sustainability of its performance, forecast the key factors for UPS=

What is your estimate of UPS=s value and its multiples?

How do your estimates of UPS=s PE and PB multiples compare with those for FedEx?  How do they compare with those for the Abest in breed@ companies multiples?