UNITED PARCEL SERVICE INC NYSE:UPS

A Valuation on UPS with DCF method

CONTENTS

BASIC UNDERSTANDING WITH UPS

1

FREE CASH FLOW PROJECTION

1

ESTIMATING THE WACC

3

COST OF DEBT COST OF EQUITY

3 3

RISK FREE RATE

3

BETA

3

MARKET RISK PREMIUM

4

CAPM

5

WACC

5

FIRM VALUATION

5

VALUATION WITH MULTIPLES

6

Basic understanding with UPS
•

United Parcel Service, Inc. (“UPS”), founded in 1907, is the world’s largest package delivery company, a leader in the U.S. less-than-truckload industry and the premier provider of global supply chain management solutions.

•

UPS has three reportable segments: U.S. Domestic Package, International Package and Supply Chain & Freight. UPS earns 62% of its revenue in U.S. Domestic
Package.

•

UPS operates in more than 200 countries and territories worldwide, however, UPS earns 75% of its revenue in U.S market.

•

UPS had approximately 435,000 employees (excluding temporary seasonal employees) as of December 31, 2014, of which 354,000 are in the U.S.. Employee health and retiree health and pension benefit costs represent a significant expense to
UPS.

•

UPS is highly operating leveraged. UPS owns or leases more than 2,700 operating facilities worldwide, owns or leases 649 air-crafts, 106,000 package cars, vans, tractors and motorcycles and 33,000 containers as of December 31, 2014.UPS is foreseeing to make significant capital investments in the business continuously.

1

Free Cash Flow Projection
We will project the growth rate depending on below analysis,
•

UPS' health and welfare