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View Full Version : Financial leverage Fedex-UPS


howardhughes8
04-27-2018, 08:08 AM
Anyone paying attention to the increasing amount of debt both these companies are taking on?

UPS went from $10B in long term debt in 2010 (with $49B in revenue) to over $20B in 2017 (with $65B in revenue).

Fedex went from $2B in long term debt in 2010 (with $35B in revenue) to over $15B in 2017 (with $60B in revenue).

Both companies have announced expansion/growth/investments in the business, but this large increase in leverage seems pretty steep over the years. Maybe attributed to historically low interest rates? Using this cheap money to finance expansion???

Maybe some financial types can chime in? Don't care for emotional responses, just facts. Maybe this is a temporary situation? Attributed to
specific events?


brownie
04-27-2018, 09:27 AM
Anyone paying attention to the increasing amount of debt both these companies are taking on?

UPS went from $10B in long term debt in 2010 (with $49B in revenue) to over $20B in 2017 (with $65B in revenue).

Fedex went from $2B in long term debt in 2010 (with $35B in revenue) to over $15B in 2017 (with $60B in revenue).

Both companies have announced expansion/growth/investments in the business, but this large increase in leverage seems pretty steep over the years. Maybe attributed to historically low interest rates? Using this cheap money to finance expansion???

Maybe some financial types can chime in? Don't care for emotional responses, just facts. Maybe this is a temporary situation? Attributed to
specific events?

Don't forget both companies will be paying almost 20% less taxes so on a 65B rev 13 B will be a pretty good offset. Another way to look at it both companies are investing their tax break back into business.

howardhughes8
04-27-2018, 09:50 AM
Don't forget both companies will be paying almost 20% less taxes so on a 65B rev 13 B will be a pretty good offset. Another way to look at it both companies are investing their tax break back into business.
Agree, but the debt load had been increasing steadily before the tax cut was announced. Maybe they knew something we didnít 😬. Hopefully all the money for growth/expansion has already been allocated and the tax cut windfall will be used to start paying down the heavy debt load.


brownie
04-27-2018, 11:43 AM
Agree, but the debt load had been increasing steadily before the tax cut was announced. Maybe they knew something we didnít 😬. Hopefully all the money for growth/expansion has already been allocated and the tax cut windfall will be used to start paying down the heavy debt load.
Fedex has been taking advantage of cheap money and investing steadily for the past 7 to 8 yes while brown been hoarding cash and paying dividends. Brown was forced to spend money and increase capacity to keep up with the fast moving E commerce and it will pay dividends years down the road but for now they have to spend it to stay in the game. Last quarter the investors weren't very happy because the company decided to put profit back in the system rather than paying out so we shall see . I'm just glad they have the money and A+ credit and profitable. 🙏🙏🙏

METO Guido
04-27-2018, 12:35 PM
FDX is still less leveraged, pound for pound. If I see the latest charts right, D/E of .90 versus UPS at 20 or so. But really tricky to forecast performance on any one metric. A lot of investors opting for consistent dividend earnings in lieu of near term trading potential. Candee man?



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