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

United Parcel Services IPO Case Solution

Case Solution

Evaluates the valuation of United Parcel Service (UPS) in mid-1999 - at the point of its IPO. Allows students the chance to evaluate UPS's present standing relative to its primary competition, Federal Express (FedEx), and to assess if the standing can be continued. Students then make predictions about UPS's future earnings performance, speculate on IPO price, and examine the rationale of their approximate in contrast to the valuation of FedEx and top performers of the class.

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?