Fedex Analysis

EQUITIES
Global Integrators
Good things don’t last forever
WHY YOU SHOULD READ THIS REPORT

7 APRIL 2021 at 16:31*
Robert Joynson Admit it: the main highlight of the past year has been the
knock on the door saying another parcel has arrived. Yet
as lockdown restrictions ease, what happens next? Keep
your taste for online delivery, and the outlook is rosy. But
if online penetration pulls back, as our analysis suggests,
the Covid bounce may prove more a bump.
We initiate on FDX and UPS, with our analysis suggesting

potential downside to consensus estimates. Jeff may have
turned his attention to space, but Amazon still has
ambitions on earth, including we think in US delivery.
That’s not great news for UPS or FedEx, which we launch

with Underperform and Neutral ratings respectively. With
Deutsche Post providing the lowest-risk exposure at the
lowest price, we reiterate Outperform.
* Date and time (London Time) on which the investment recommendation was finalised. It may differ from the date and time of broad dissemination
on the website. See Appendix (on p87) for Analyst Certification, Important Disclosures and Non-US Research Analyst disclosures.
RATING TARGET PRICE EPS 21e EPS 22e
Deutsche Post DHL (+) EUR52  27%  14%  16%
GLOBAL INTEGRATORS FedEx
UPS
(=)
(-)
USD273
USD150
-
-
-
-
-
-
Good things don’t last forever

Initiating coverage on UPS (-) and FedEx (=). Deutsche Post (+) remains our preferred play
7 APRIL 2021
The market cap of the integrators has risen by >50% since Jan-2020, with Covid providing a
Robert Joynson, CFA volume feast. While some of these benefits will persist, our analysis suggests a slowdown as
(+44) 207 039 9515 stimulus/inventory benefits ease and Covid restrictions are lifted – most notably in the US. Our
[email protected]
research also reveals a risk of increased US competition from Amazon, suggesting consensus
estimates for UPS/FDX may prove optimistic. We initiate coverage on UPS with an Underperform
James Hollins rating and FedEx with Neutral. Our Outperform rating on Deutsche Post remains unchanged.
(+44) 203 430 8438
Dario Maglione Package volumes may disappoint as Covid restrictions ease, most notably in the US
(+44) 203 430 8551
A widely held belief is that the Covid-driven surge in parcel volumes will prove permanent. We
Hugo Watkins
(+44) 203 430 8440 agree to an extent, but our analysis suggests that as Covid restrictions are eased, online retail
penetration may decline significantly, providing cautious readthrough for H2. This is particularly
[email protected]
true in the US, where we believe stimulus cheques have accounted for much of the volume spike.
In the US our analysis suggests clear risks from Amazon – particularly for UPS
Our analysis shows Amazon Logistics’ US footprint has risen by almost 60% since H1 2020,
suggesting a step-change in its delivery ambitions. We believe some of this relates to changes to
Amazon Merchants’ delivery terms as of 1 Feb. But the possibility that Amazon may be planning
to make its US delivery network available for other online retailers – as it has already done in the
UK - appears clear. With Amazon accounting for >20% of its US Domestic revenue, the risk for
UPS is clear. But FedEx is not immune either, despite parting ways with Amazon in 2019.
Deutsche Post provides the best exposure (and lowest risk) at the lowest cost
While we see downside risk to consensus for UPS and FedEx, we are more relaxed on Deutsche
Post - partly because of its low exposure to the US following its decision to exit the domestic
market in the late-2000s. With DPW also trading on the lowest EV/EBIT on a like-for-like basis,
we believe it provides the best exposure at the lowest price.
Deutsche Post DHL (+) FedEx (=) UPS (-)

Logistics  Germany Freight & Logistics  USA Freight & Logistics  USA
Price*: EUR47.2  TP: EUR52  Upside: 10% Price*: USD282.2  TP: USD273  Downside: 3% Price*: USD173.0  TP: USD150  Downside: 13%
Market cap: EUR57.2bn Market cap: USD74.8bn / EUR63.3bn Market cap: USD151.1bn / EUR127.9bn
12/21e 12/22e 12/23e 12/24e 05/21e 05/22e 05/23e 05/24e 12/21e 12/22e 12/23e 12/24e
EPS, Adjusted (EUR) 2.88 3.07 3.28 3.46 EPS, Adjusted (USD) 16.4 17.1 18.3 19.4 EPS, Adjusted (USD) 7.72 7.76 7.83 8.32
EPS - Refinitiv (EUR) 2.85 3.05 3.31 3.38 EPS - Refinitiv (USD) - - - - EPS - Refinitiv (USD) - - - -
P/E (x) 16.4 15.4 14.4 13.6 P/E (x) 17.2 16.5 15.4 14.6 P/E (x) 22.4 22.3 22.1 20.8
Net yield (%) 3.0 3.2 3.4 3.6 Net yield (%) 1.1 1.1 1.1 1.1 Net yield (%) 2.4 2.4 2.4 2.5
FCF yield (%) 2.4 2.8 3.8 3.8 FCF yield (%) 1.0 3.0 3.2 3.5 FCF yield (%) 4.1 3.5 3.5 3.7
EV/Sales (x) 1.1 1.0 1.0 1.0 EV/Sales (x) 1.2 1.1 1.0 1.0 EV/Sales (x) 2.0 1.9 1.8 1.7
EV/EBITDA (x) 8.2 7.7 7.2 6.8 EV/EBITDA (x) 10.1 9.3 8.7 8.1 EV/EBITDA (x) 14.3 14.0 13.8 13.1
EV/EBITA (x) 13.4 12.7 12.0 11.3 EV/EBITA (x) 16.5 14.1 13.1 12.2 EV/EBITA (x) 18.3 18.0 17.8 16.8
EV/CE (x) 1.9 1.7 1.7 1.8 EV/CE (x) 1.6 1.5 1.4 1.3 EV/CE (x) 4.1 3.9 3.7 3.5
Net Debt/EBITDA, Adj. (x) 1.7 1.7 1.7 1.6 Net Debt/EBITDA, Adj. (x) 1.8 1.6 1.3 1.1 Net Debt/EBITDA, Adj. (x) 1.3 1.1 1.0 0.8
Prices at 6 April
Contents
Inside the Integrators ______________________________________ 3
Investment summary ______________________________________ 4
Volume drivers ___________________________________________ 9
US Domestic ___________________________________________ 17
Volume outlook _________________________________________ 18
Competition outlook ______________________________________ 19
Lessons from Europe _____________________________________ 27
Earnings outlook ________________________________________ 29
International ____________________________________________ 33
Volume outlook: US ______________________________________ 34
Competition outlook: US __________________________________ 39
Volume outlook: ex-US ___________________________________ 42
Competition outlook: ex-US ________________________________ 46
Earnings outlook ________________________________________ 58
Valuation ______________________________________________ 63
Company Section________________________________________ 75
DEUTSCHE POST DHL __________________________________ 76
FEDEX ________________________________________________ 79
UPS __________________________________________________ 82
Investment case, valuation and risks _________________________ 85
Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 2

Inside the Integrators
Figure 1: Global Integrators: Valuation and recommendation summary

EBNPP
TP Upside P/E (x) EV/EBITA EV/EBITDA FCF Yield Div. Yield EPS Growth
Rating
CY21e CY22e CY21e CY22e CY21e CY22e CY21e CY22e CY21e CY22e 2021e 2022e
Deutsche Post + 52 10% 16.4x 15.4x 13.4x 12.7x 8.2x 7.7x 2.4% 2.8% 3.0% 3.2% 3.6% 6.6%
FedEx = 273 -3% 16.8x 15.8x 15.0x 13.5x 9.6x 8.9x 2.2% 3.1% 1.1% 1.1% 72.7% 4.0%
UPS - 150 -13% 22.4x 22.3x 18.3x 18.0x 14.3x 14.0x 4.1% 3.5% 2.4% 2.4% -1.0% 0.5%
Source: Exane BNP Paribas estimates, Priced at 6 April 2021
Figure 2: Overview of EBIT composition by business activity
100%
12% 12%
29%
80%
47% Other
60% 20%
% of Total
65% Supply Chain & Freight

US Domestic Package
40% International Package
52%
20% 41%
24%
0%
Deutsche Post DHL UPS FedEx
Source: Company data, Exane BNP Paribas estimates
Figure 3: The differentiated work we have done on the key debates
Will parcel volume growth remain strong as Covid restrictions are eased?
To a certain extent yes. There is no question that Covid restrictions have cause many people to shop online
more, and that much of this shift will persist. But our analysis shows that as lockdown measures were lifted last
summer, online penetration declined sharply - a pattern that may repeat as 2021 progresses
Will Amazon disrupt the parcel delivery space further?
In the US, the rate at which Amazon Logistics has added square footage in recent months - almost 60% since
H1 2020 - suggests the answer is almost certainly yes. We know that Amazon changed delivery terms for its
Merchants on 1 February. We don't know whether Amazon plans to make its US delivery network available to
other online retailers, but the fact it has now done so in the UK appears ominous
On a like-for-like basis, how does Deutsche Post's valuation compare to its US peers?
On EV/EBIT, Deutsche Post is the cheapest of the three integrators on a headline basis. But if one backs out
the implied valuation of DHL Express and DHL eCommerce - the businesses that are most similar to UPS and
FedEx's core package businesses, we estimate a valuation of just 9.7x - significantly cheaper than both of its
US peers
Can the integrators continue to outperform into 2022?
With Deutsche Post and UPS trading towards the upper end of their historic ranges based on P/E, investors will
be dependent on these multiples remaining stable (or potentially rising further). With investors increasingly
starting to appreciate the quality of the business mix, this appears likely for DPW. But for UPS we are less
convinced
How do the integrators tend to perform at the current point in the cycle?
For the US integrators, the correlation between the P/E multiples on which the stocks trade and the monthly
ISM survey is striking. We have no crystal ball, but with the ISM having hit a 37-year high last week, we would
presume risk on a one-year view is to the downside - a development that history suggests could weigh on
UPS/FedEx
Source: Exane BNP Paribas

Investment summary
Initiating coverage on UPS (-) and FedEx (=); Deutsche Post (+) remains
our top pick
The three global integrators - Deutsche Post DHL, FedEx and UPS – have enjoyed a
stellar run over the past year. Boosted by a Covid-driven volume surge, the combined
market cap has risen by >50% since January 2020.
While some of the volume benefit caused by the pandemic will remain, our analysis
suggests consensus expectations for the sector overall may prove optimistic – most
notably in the US. UPS and FedEx are most exposed to the areas we think may
disappoint, leading us to initiate coverage with Underperform and Neutral ratings
respectively.
Following its decision to exit the US Domestic market in the late-2000s, we think
Deutsche Post currently provides the best exposure (and lowest risk) at the lowest
cost. We reiterate our Outperform rating and raise our Target Price to EUR52.
Volumes may disappoint as Covid restrictions are eased – most notably

in the US
Our discussions with corporates and investors alike suggest it has become a near-
universal view that; (i) the Covid-driven surge in parcel volumes will prove permanent;
and (ii) volumes will continue to see robust growth rates even relative to the tough
comps of recent quarters. Consensus data from Visible Alpha shows that the sell-side
agrees.
We agree that some of the step change in parcel volumes caused by Covid will indeed
prove permanent. However our analysis of parcel volumes across multiple countries
shows that when lockdown restrictions were eased during Q3 last year, online retail
penetration – and consequently parcel volumes – slowed significantly.
Figure 4: US and UK online sales as % of Total retail sales excluding automotive

and fuel, since January 2019 (rolling 3 months)
34% 30%
32% 28%
...but then diverged
30% markedly post-Covid 26%
28% 24%
26% 22% UK (left-
hand side)
US
UK
24% 20%
US (right-
22% 18%
hand side)
20% 16%
18% 14%
16% 12%
14% 10%
Oct-2019
Oct-2020
Jan-2019
Jul-2019
Jan-2020
Jul-2020
Jan-2021
Apr-2019
Apr-2020
Source: UK government, US Census Bureau, Exane BNP Paribas estimates

Assuming that Covid restrictions are eased in H2 (as currently appears likely –
especially in the US, where a 4 July Covid ‘Independence Day’ is being targeted), the
read-through from 2020 suggests a high likelihood that parcel volumes will slow. That
volumes may turn negative is not our base case, but this cannot be ruled out.
In the US, the possibility that volumes may disappoint appears especially plausible
given the beneficial impact of the stimulus cheques paid during Q2 2020-Q1 2021. For
US International import packages in particular, we believe the stimulus cheques were
highly beneficial – partly due to the de-stocking of retail inventories this gave rise to.
Figure 5: YoY change in International import volumes handled by FedEx/UPS at

Memphis/Louisville (by weight), January 2018 to February 2021
50%
40%
30%
YoY change %
20%
10%
0%
-10%
-20%
-30%
Oct-18
Oct-19
Oct-20
Jan-18
Apr-18
Jul-18
Jan-19
Apr-19
Jul-19
Jan-20
Apr-20
Jul-20
Jan-21
Source: Industry data, Exane BNP Paribas estimates
In US Domestic, our analysis suggests clear risks from Amazon

While the US Domestic operations of UPS/FedEx enjoyed a strong H2 2020, the fact
remains that these businesses have seen ongoing margin pressure for two decades.
Despite Covid-related benefits, the EBIT produced by UPS’ US Domestic Package
division in 2020 was less than that seen in 2011. Since 2016, much of this pressure
has been caused by Amazon Logistics. But market share loss for the UPS/FDX is not
new – our analysis suggests their combined share has declined each year since 2011.
Figure 6: UPS and FedEx share of US parcel delivery market*, 2010 to 2020
70.0%
60.0%
24.8%
23.2%
23.7%
23.7%
22.8%
50.0%
22.4%
21.9%
21.0%
20.2%
% of Total
19.0%
40.0%
13.6%
FedEx
30.0% UPS
40.8%
39.6%
38.1%
36.6%
36.6%
34.9%
20.0%
33.3%
32.4%
30.3%
28.9%
26.9%
10.0%
0.0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Industry data, Exane BNP Paribas estimates. *Total market comprised of USPS, UPS, FedEx, Amazon

In this context, our analysis which reveals how the square footage of Amazon Logistics
facilities in the US has risen by almost 60% since H1 2020 is concerning. At the very
least, it would appear Amazon is targeting in-house delivery for a significantly higher
share of both its own volumes and that of its Merchants (for which delivery terms were
amended on 1 February 2021).
However the possibility that Amazon may be planning to make its US delivery network
available to other online retailers – as it has already done in the United Kingdom –
cannot be ruled out.
Figure 7: Footprint of newly opened Amazon Logistics facilities in the United

States (Square feet, million), Q1 2010 to Q4 2021
50
45
40
35
Square feet (million)
30
Cross Dock
25
Sortation
20
Fulfilment
15
10
5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Given Amazon’s penchant for competitive pricing, such a development could prove a
significant negative for UPS/FedEx over the coming years. With Amazon accounting for
>20% of the revenue of its US Domestic Package division, UPS has a high exposure in
this respect.
While FedEx’s direct exposure to Amazon is minimal following its decision to part ways
in 2019, the indirect impact of Amazon entering its delivery services to FedEx
customers would likely be significant.
Deutsche Post provides the best exposure at the lowest price

Following its decision to exit the US Domestic market in the late-2000s, Deutsche Post
has no exposure to the Amazon-related risks outlined above. Equally the international
package volumes handled by DHL Express have much less exposure to the US market
(which we believe may have overheated) than that of UPS or FedEx.
Despite its more favourable exposure, Deutsche Post trades on just 12.4x 12m-forward
consensus EV/EBIT, a significant discount to UPS on 17.2x and slight discount to
FedEx on 13.6x.
As shown below, our analysis also shows that Deutsche Post trades at discount of
around -19% versus a peer-weighted benchmark – towards the high end of the
discount on which the stock has historically traded.

Figure 8: Based on a peer-weighted EV/EBIT, DPW trades close to the largest discount seen since 2013
Deutsche Post 12-month forward EV/EBIT (‘actual’) vs. Peer Difference between Deutsche Post 12-month forward EV/EBIT
weighted average (‘weighted’) and Peer weighted average
18.0 10%
16.0 5%
0%
EV/EBIT (12-month forward)
14.0
Actual vs. weighted

12.0 -5%
10.0 -10%
8.0 -15%
6.0 -20%
4.0 -25%
2.0 -30%
0.0 -35%
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Weighted Actual Difference Average Current
Source: Exane BNP Paribas estimates based on Datastream data
Furthermore, if we back out the valuation of the businesses that are most similar to
UPS and FedEx – DHL Express and DHL eCommerce – we find that the 12m-forward
EV/EBIT of these businesses implied by current valuation is just 9.7x.
This is in-line with the historic average despite Deutsche Post’s strong recent share
price performance. This equates to a discount of -44% versus UPS (on 17.2x) and a
discount of -29% versus FedEx (on 13.6x).
Figure 9: DHL Express and DHL eCommerce implied EV/EBIT (12m-forward),

based on peer comps
25.0
20.0
EV/EBIT (implied)
15.0
EV/EBIT (implied)
Average
10.0
Current
5.0
0.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
In short, the decision to rank Deutsche Post as our preferred play in the space is a
straightforward, with our Outperform rating reiterated and our Target Price raised from
EUR41 to EUR52.
We acknowledge this provides rather limited upside of just +10% to the current
EUR47.2 share price (which rose by 10-15% over the past few weeks while we were
preparing the analysis in this report). But our analysis suggests relative outperformance
versus UPS/FedEx could prove more substantial.

Our EPS forecasts are materially below-consensus for UPS/FedEx …
An overview of our forecasts versus consensus is provided below. At the net income
level the main differences versus consensus are for UPS and FedEx for 2022E and
2023E. For 2022E we stand -15% and -6% for UPS and FedEx respectively, while the
corresponding deltas for 2023E are -19% and -11%.
Figure 10: Overview of EBNPP forecasts vs. consensus
EBIT Net income DPS

2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
EBNPP 5,833 6,151 6,481 3,580 3,751 3,946 1.40 1.50 1.60
Consensus 5,721 6,001 6,436 3,570 3,818 4,083 1.45 1.55 1.65
Deutsche Post 2% 2% 1% 0% -2% -3% -3% -3% -3%
EBNPP 6,621 7,047 7,399 4,615 4,950 5,225 3.00 3.00 3.00
Consensus 5,995 6,918 7,720 4,803 5,254 5,862 2.60 2.79 3.00
FedEx 10% 2% -4% -4% -6% -11% 15% 8% 0%
EBNPP 9,787 9,836 9,860 7,143 7,181 7,242 4.09 4.11 4.15
Consensus 9,624 10,300 10,809 7,861 8,448 8,953 4.23 4.44 4.66
UPS 2% -5% -9% -9% -15% -19% -3% -7% -11%
Source: Datastream, Exane BNP Paribas estimates, Note: for FedEx 2021E corresponds to FY22E, etc.
…which we consider pertinent given the point in the cycle

Given our below-consensus estimates for UPS and FedEx, the multiple on which these
stocks trade could prove important for returns over the year ahead. With this in mind,
the correlation between the 12m-forward consensus P/E on which UPS/FedEx trade
and the monthly ISM survey is worth noting. As shown below, the relationship has been
strongly positive over the past decade.
We have no crystal ball to forecast the trajectory of the ISM survey over the coming
months. Nonetheless with the ISM having hit a 37-year high of 64.7 last week, one
would presume risk on a 12-month view lies to the downside.
We rate FedEx Neutral rather than Underperform given that the current 12m-forward
P/E on which the stock trades is not materially above the historic average. UPS’
corresponding multiple, on the other hand, stands at the very high end of its historic
range.
Figure 11: Aggregate 12m-forward P/E of UPS/FedEx vs. ISM inc. 3-month lag
22.0 70
20.0
65
P/E (12m-forward)
ISM, 3-month lag
18.0
60
P/E
16.0
ISM -3
55
14.0
50
12.0
10.0 45
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
Source: Datastream, Exane BNP Paribas estimates

Volume
drivers

Parcel volume growth has consistently been robust...
The global parcel market has been a one-way juggernaut over the past decade, even
before Covid. Pitney Bowes data suggests a volume CAGR for 2013-2019 of +19%,
with an overall increase during this period of 186%.
Figure 12: Global parcel volume, 2013 to 2019

+19% CAGR
120
103.0
100
87.5
Parcel volume (billion)
80 74.0
63.0
60 51.0
43.0
40 36.0
20
0
2013
2014
2015
2016
2017
2018
2019
Source: Pitney Bowes, Industry data, Exane BNP Paribas estimates
A regional decomposition reveals the primary driver of this strong global growth was
Asia, in which volumes during 2013-2019 rose by +353% (+23% CAGR). The
corresponding CAGRs seen in North America and Europe were +9% and +8%
respectively.
Figure 13: The Asian market has been the primary driver for strong global growth in parcel volumes
Indices of parcel volumes in Asia, North America and Europe, YoY change in parcel volumes in Asia, North America and
2013 to 2019 Europe, 2014 to 2019
400 30%
350
25%
300
Index (base = 100)
20%
YoY change %
250
200 15%
150
10%
100
5%
50
0 0%
2013
2014
2015
2016
2017
2018
2019
2014
2015
2016
2017
2018
2019
Asia North America Europe Asia North America Europe

...driven by increased online sales
The primary driver of this robust growth pre-Covid was growth in eCommerce, as
evidenced by the online share of total retail sales in both the US and UK rising
materially during each of the past ten years.
and fuel, 2010 to 2020
27.2%
30%
25%
19.1%
17.9%
17.8%
16.3%
20%
15.0%
14.5%
13.7%
12.8%
% of Total
12.4%
11.9%
UK
11.2%
10.4%
15%
10.2%
9.2% US
9.2%
8.5%
8.3%
8.0%
7.2%
7.1%
10%
6.1%
5%
0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: ONS, Census Bureau, Exane BNP Paribas estimates
Unsurprisingly, B2C parcel volumes have grown significantly faster than B2B. While
there is no global or regional measure for B2C share, the data provided below for UPS’
US Domestic Package business likely provides a reasonable proxy for volumes within
North America and Europe as a whole.
Figure 15: UPS US Domestic packages, split by B2C and B2B, rolling 12 months,
Q1 2012 to Q4 2020
100%
80%
60%
% of Total
B2B
40% B2C
20%
0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2012 2013 2014 2015 2016 2017 2018 2019 2020

While demographic drivers will remain, some tailwinds are likely to fade
The primary driver of online sales growth has simply been a growing share of people
with internet access. From a forward-looking perspective however, it is important to
note that this metric is now approaching 100% in markets such as the UK, Germany
and Spain.
Figure 16: Percentage of population using the internet, by country, 2000 to 2019
100%
90%
United Kingdom
80%
Spain
70%
Germany
60%
% of Total
United States
50%
40% Poland
30% France
20% Italy
10% China
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: World Bank, Exane BNP Paribas
Analysis of the UK market specifically, which we use as a proxy for a mature western
market, shows that the percentage of adults shopping online has shown a similar
upward trend.
That the data shows almost everybody within younger age groups (aged 16-44) shops
online is unsurprising. What is perhaps more insightful, however, is that the share of
older age groups shopping online - in particular those aged 65 or over - has reached
almost two-thirds.
Figure 17: Percentage of UK adults that have shopped online within the last 12
months, by age group, 2008 to 2020
100%
80%
25-34
16-24
60%
% of Total
35-44
45-54
40%
55-64
65+
20%
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Exane BNP Paribas estimates

It is also unsurprising that the age groups placing the highest number of online orders
are those of a working age. Yet differential of these age groups versus the youngest
(age 16-24) and oldest (65+) age groups surveyed is not huge, suggesting
demographic tailwinds during future years may not be as strong as some perceive.
Figure 18: Average number of online purchases made by those who visited the
internet within the last 3 months, by age group, 2015 to 2020
Of the age groups with the most disposable
10.0 9.4 income, the average number of online
9.3
purchases does not differ significantly
9.0 8.6
8.1
8.0
Number of online purchases
6.8
7.0
5.8
6.0
5.0
4.0
3.0
2.0
1.0
0.0
35-44 25-34 45-54 55-64 16-24 65+
Source: ONS, Exane BNP Paribas estimates
This cautionary conclusion is supported by UK data that shows the average number of
online purchases made by those that use the internet has risen only moderately in
recent years.
This suggests the primary driver of online growth in the UK has not been people buying
more parcels, but rather the number of people buying online.
Figure 19: Frequency of online shopping in the UK; number of purchases via the
internet by those who visited the internet within the past 3 months
The frequency of purchases per online shopper in the UK has
grown only slightly over the past five years
10.0
9.0 8.3
Average number of purchases
8.0 8.0
8.0 7.4 7.5
7.1
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2015
2016
2017
2018
2019
2020

B2C volumes will almost certainly see robust mid-term growth, but in the
near-term a pull-back cannot be ruled out
While the likelihood of parcel volumes continuing to rise in the mid-term is a universally
held view, the near-term outlook as Covid restrictions ease is more debatable. We find
that corporates and investors alike tend to be glass-half-full in this respect, but our
analysis suggests some doubt.
Our analysis of online sales as a % of Total retail sales (exc. automotive and fuel)
shows that the US and UK developed at a similar pace during 2010 to 2019, but that
this relationship then de-coupled in 2020.
35% 30%
30% 25%
The development of online
retail penetration in the US
25%
and UK progressed at a 20%
similar pace during the UK (left-
20% decade pre-Covid hand side)
US
UK
15%
15% US (right-
hand side)
10%
10%
5% 5%
0% 0%
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
A more ‘zoomed in’ view of the period since January 2019 shows more clearly the
extent to which online penetration in the UK outpaced that of the US. What we find
particularly interesting, however, was the pull-back in UK online sales share seen
during Q3 2020, when lockdown measures were eased.
34% 30%
32% 28%
...but then diverged
30% markedly post-Covid 26%
28% 24%
26% 22% UK (left-
hand side)
US
UK
24% 20%
US (right-
22% 18%
hand side)
20% 16%
18% 14%
16% 12%
14% 10%
Oct-2019
Oct-2020
Jan-2019
Apr-2019
Jul-2019
Jan-2020
Apr-2020
Jul-2020
Jan-2021

A decomposition of the UK data reveals that the pull-back in online penetration during
Q3 was particularly pronounced for ‘Predominantly non-food’ retailers, which is of
course the primary market served by the parcel delivery companies.
Figure 22: UK internet sales as % of total retail sales for; (i) Predominantly non-
food stores; and (ii) Predominantly food stores, since January 2019
45%
40% While online share of food

sales has remained stable
35% since the pandemic began,
non-food online share
30% declined significantly when
lockdown restrictions were
% of Total
25% Predominantly
eased... non-food
20%
Predominantly
15% food
10%
5%
0%
Oct-19
Oct-20
Jan-19
Apr-19
Jul-19
Jan-20
Apr-20
Jul-20
Jan-21
Source: UK government, Exane BNP Paribas
Data for Clothing & footwear and Household goods specifically provides additional
useful colour given that clothes stores in the UK were closed during the second (post-
summer) lockdown, but many stores selling household goods were not.
In this context, it is interesting to note that online penetration for Household goods did
not rise significantly during late-2020/early-2021, whereas online penetration for
Clothing & footwear did.
Figure 23: UK internet sales as % of total retail sales for; (i) Clothing & footwear;
and (ii) Household goods, since January 2019
50%
45% ...with Clothing & footwear
and Household goods
40% providing good examples
of online market share
35%
fluctuating significantly
30% around lockdown
% of Total
restrictions Clothing &

25% footwear
20% Household
goods
15%
10%
5%
0%
Oct-18
Jan-18
Oct-19
Jul-18
Jan-19
Oct-20
Jul-19
Jan-20
Jul-20
Jan-21
Apr-18
Apr-19
Apr-20
Source: UK government, Exane BNP Paribas

Parcel volume data supports the view that growth will slow (or
potentially turn negative) as lockdown measures are lifted
Consistent with the UK data presented above, our analysis shows that the YoY growth
rate of parcel volumes handled by European national mail incumbents faded
significantly during Q3 2020, when lockdown measures were eased.
Figure 24: YoY change in parcel volumes handled by European domestic

incumbents, Q1 2019 to Q4 2020
90%
80%
70%
60%
50% BPost
YoY change %
40% CTT
30% Austrian Post
20% PostNL
10% Deutsche Post
0%
-10%
-20%
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
An aggregation of the parcel volumes handled by these five incumbents shows that the
growth rate in Q3 2020 was only slightly more than half the average growth rate seen
during Q2 2020 and Q4 2020.
Figure 25: YoY change in aggregate parcel volumes handled by European

domestic incumbents, Q1 2019 to Q4 2020
30%
The growth rate seen 25.6%
during Q3 was slightly 24.3%
25% more than half that seen
during Q2/Q4
20%
YoY change %
15% 13.4%
10% 8.9%
7.2% 6.7%
4.8% 5.1%
5%
0%
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020

US Domestic

Volume outlook
US Domestic volumes have grown by +10% CAGR since 2010...

US domestic parcel volumes grew by 154% during 2010 to 2020, a CAGR of 10%.
Figure 26: US parcels delivered by USPS, UPS, FedEx and Amazon, 2010 to 2020
(billion)
22.0
20.0
18.0
5.1
16.0
1.9
Packages (billion)
14.0 0.7 2.7

0.6 3.1 Amazon
12.0 2.9
2.8 FedEx
10.0 2.7
2.5 5.4
2.4 2.4 4.7 UPS
8.0 2.2 4.4
2.0 2.1 4.3
4.1 USPS
6.0 3.9 4.0
3.5 3.6
3.4 3.4
4.0
6.1 6.2 6.8
5.0 5.6
2.0 3.5 3.9 3.9 4.4
3.2 2.9
0.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
…with robust growth likely to continue

During 2011-2019, the growth trajectory was relatively stable, averaging 8.8% per
annum, which we consider a reasonable proxy for 2023-2025. For 2021, we forecast
growth in the upper-single-digits, with the tough comp from 2020 more than offset by
continuing organic growth together with continuing benefits from stimulus cheques. We
envisage slower growth in 2022, as the benefits of stimulus cheques wear off.
Figure 27: YoY change in US domestic parcel volumes, 2012 to 2020

30%
25.4%
25%
20%
YoY change %
Pre-Covid average = 8.8%

15%
12.6%
10.1%
10% 7.9% 8.5%
7.1% 7.7%
6.9% 6.8%
5%
0%
2012
2013
2014
2015
2016
2017
2018
2019
2020

Competition outlook
UPS/FDX have consistently lost share...

Given the soaring valuations of UPS/FedEx since last year (UPS +44%/FDX +80%),
one may be forgiven for assuming market share gains were made. In reality the
opposite was true, with the combined market share of these players recording the
largest decline on our records.
Figure 28: UPS and FedEx share of US parcel delivery market*, 2010 to 2020
70.0%
60.0%
24.8%
23.2%
23.7%
23.7%
22.8%
50.0%
22.4%
21.9%
21.0%
20.2%
% of Total
19.0%
40.0%
FedEx
13.6%
30.0% UPS
40.8%
39.6%
38.1%
36.6%
36.6%
34.9%
20.0%
33.3%
32.4%
30.3%
28.9%
26.9%
10.0%
0.0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Industry data, Exane BNP Paribas estimates. *Total parcel delivery market comprised of USPS, UPS,
FedEx and Amazon
...primarily at the expense of Amazon

While USPS took some market share from UPS/FedEx until 2017, in recent years the
big mover has been Amazon Logistics, which we estimate had a market share of 25-
26% in 2020.
Figure 29: USPS and Amazon share of US parcel delivery market*, 2010 to 2020
70.0%
60.0%
50.0%
25.5%
11.9%
5.3%
4.7%
% of Total
40.0%
Amazon
30.0% USPS
42.8%
42.4%
41.9%
40.3%
39.7%
39.0%
38.6%
38.2%
37.2%
20.0%
34.4%
34.0%
10.0%
0.0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Industry data, Exane BNP Paribas estimates. *Total parcel delivery market comprised of USPS, UPS,
FedEx and Amazon

...which is a trend we expect to continue – and potentially even
accelerate – during the years ahead
Based on consensus forecasts for the US Domestic operations of UPS and FedEx
(outlined later of this report), it would appear the sell-side is relatively sanguine on the
likelihood that Amazon could cause increased disruption during the years ahead. Yet
our analysis strongly suggests the opposite.
We identify five factors that suggest Amazon may become more problematic for FedEx
and (in particular) UPS over the coming years, each of which are outlined on the
following pages.
Below we provide an overview of each:
1) Ramp-up in Amazon’s US distribution capacity: our analysis shows a step-

change in the square footage occupied by Amazon Logistics in the US in H2 2020,
which appears disproportionate to the Covid-driven increase in sales. The expansion of
Sortation facilities is particularly remarkable.
2) Changes to Amazon Merchants’ delivery terms: in February 2021, new rules for
merchants who sell, fulfil and ship under Amazon’s Seller Fulfilled Prime (SFP)
program came into effect which meant sellers will need to prove they consistently hit
the delivery timeframe required under Prime.
Given Amazon estimated <16% of orders placed with SFP merchants met the delivery
requirement, the share of units sold by third-party sellers that are fulfilled by Amazon
appears likely to rise significantly in 2021.
3) More widespread Amazon next-day coverage: while the overall payload of the
Amazon Air fleet remains significantly smaller than that of UPS or FedEx, this existing
fleet now provides good coverage of most of the United States population in terms of
next-day delivery.
4) Potential for Amazon delivery to be offered more widely: in the US, a

longstanding threat has been the prospect that Amazon will open up its delivery
network to all businesses (i.e. beyond the current scope of providing fulfilment services
to Amazon Merchants). In this respect, it is important to note that Amazon has already
started to offer this service in the UK.
While it is not confirmed that Amazon will make its delivery services available to all
online retailers in the US, the recent ramp-up of its logistics footprint, together with its
initiation of this service in the UK, would appear to point in this direction.
5) Evidence that Amazon volumes are highly profitable: documentation released by

USPS in response to Freedom of Information request suggests Amazon volumes are
highly profitable. Specifically, during FY19 the documents suggest that the USD3.9bn
of revenue that USPS received from Amazon contributed USD1.6bn of ‘profits’, equal
to a 41% contribution margin.
While such a margin may appear unrealistically high, it does make more sense when
one considers that 75% of the parcels that USPS delivers on behalf of Amazon are last
mile only.

(1) Ramp-up in Amazon’s US distribution capacity
Our analysis of the square footage occupied by Amazon Logistics in the US shows a
ramp-up since Q3 2020 on an entirely different scale than anything done previously.
While some of this expansion was of course necessitated by the Covid-driven surge in
demand, the extent of the increase is disproportionate relative to the corresponding
increase in Amazon sales.
Figure 30: Footprint of newly opened Amazon Logistics facilities in the United
States (Square feet, million), Q1 2010 to Q4 2021
50
45
40
35
30
Cross Dock
25
Sortation
20
Fulfilment
15
10
5
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
On a cumulative basis, the expansion of Amazon Logistics’ Sortation facilities is

particularly remarkable, with the square footage set to more than treble between end-
H1 2020 and end-2021.
The corresponding increase in the square footage of Amazon Logistics’ US Fulfilment

centres is much more moderate, at +69% over the same period (vs. +197% for
Sortation centres), suggesting the step-up in footprint is primarily geared towards
improving Amazon’s delivery capabilities.
Figure 31: Footprint of Amazon Logistics facilities in the United States (Square
feet, million), Q1 2010 to Q4 2021
250
200
150
Fulfilment
Sortation
100
Cross Dock
50
The footprint of
Amazon's sortation
facilities is set to
0 more than treble by
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
end-2021
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

(2) Amazon changes to Merchant terms
In August 2020, Amazon announced new rules would come into effect on 1 February
2021 for merchants who sell, fulfil and ship under Amazon’s Seller Fulfilled Prime (SFP)
program. Specifically, sellers will need to prove they consistently hit the one- to two-day
delivery timeframe required under Prime, and will be required to offer Saturday pickups
and deliveries (see this article). The rationale for the move is that Amazon estimated
<16% of orders placed with SFP merchants met the two-day delivery requirement.
Given that Merchants account for the majority of Amazon’s physical merchandise sales
in the US, the significance of this move should not be under-estimated. In 2018, almost
three-quarters of Amazon third-party sellers had just 1-5 employees.
Figure 32: Share of physical gross merchandise sales sold on Amazon by

independent third-party sellers (mainly SMEs), 2000 to 2018
70%
58%
56%
54%
60%
51%
49%
46%
42%
50%
38%
% of Total
34%
40%
31%
30%
29%
28%
28%
25%
22%
30%
17%
20%
6%
10%
3%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Amazon, Exane BNP Paribas estimates
The share of units sold by third-party sellers that are fulfilled by Amazon has plateaued
in the low-to-mid-50% range over the past 2-3 years, but appears likely to rise
significantly in 2021 given the new rules (which incentivise third-party sellers to use
Amazon Fulfilment). Given the vast majority of non-Amazon fulfilled volumes are
delivered by UPS/FDX/USPS, the downside risk for these operators is clear.
Figure 33: Share of units sold by third-party sellers that are fulfilled by Amazon,
Q1 2004 to Q4 2020
60%
% of third-party units fulfilled by Amazon
50%
40%
30%
20%
10%
0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: Amazon, Exane BNP Paribas

(3) More widespread Next-day delivery
The ramp-up of the Amazon Air fleet in recent years is well known to investors, with our
analysis showing that 2020 was the busiest year to-date in this respect with the delivery
of 22 aircraft. The increase in payload since 2016 has been relatively linear overall.
Figure 34: Amazon Air’s fleet has expanded considerably since taking its first aircraft delivery in 2016
Amazon Air number of aircraft delivered, Q1 2016 to Q1 2021 Amazon Air’s total payload capacity (Tonnes ‘000), Q1 2016
to Q1 2021
9 3.0
8 8
8
2.5
7
6 6
Aircraft deliveries
Payload (Tonnes '000)

6 2.0
5 5
5
4 4 4 4 1.5
4
3 3
3 1.0
2 2
2
1 1 1 0.5
1
0 0 0 0
0 0.0 Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020 2021
Source: Planespotters.net, Exane BNP Paribas
While the overall payload of the Amazon Air fleet remains significantly smaller than that
of UPS or FedEx, this existing fleet now provides good coverage of most of the United
States population in terms of next-day delivery.
Figure 35: Payloads of Amazon Air, UPS and FedEx fleets, as of March 2021
30.0
24.4
25.0
Payload (Tonnes '000)
20.0
17.3
15.0
10.0
5.0 2.8
0.0
Amazon Air UPS FedEx
Source: Planespotters.net, Exane BNP Paribas estimates
As shown on the next page, Amazon Air’s hubs at Cincinnati and Wilmington already
provide daily services to airports that have a large share of the US population living
within a 250-mile radius.
While we do not have precise data on the percentage of the US population to which
Amazon can currently provide next-day delivery, the overlap between this 250 mile
coverage and the second map that summarises US population density is high.

Figure 36: Locations within 250 miles of an airport with Amazon Air service from Cincinnati and Wilmington
Source: DePaul University, Exane BNP Paribas
Figure 37: US electricity transmission lines and population density
Source: EIA, Exane BNP Paribas

(4) Amazon has already started to offer third-party delivery services
From a UPS/FDX perspective in the US, a longstanding threat has been the prospect
that Amazon will open up its delivery network to all businesses (i.e. beyond the current
scope of providing fulfilment services to Amazon Merchants). In this respect, it is
important to note that Amazon has already started to offer this service in the UK.
With respect to the United States, the Washington Post (owned by Amazon CEO Jeff
Bezos) reported in November 2020 that Amazon “is building a logistics system to one
day deliver packages for customers to compete directly against UPS and FedEx,
something it’s already doing in the United Kingdom.” While it is not confirmed that
Amazon will make its delivery services available to all online retailers in the US, the
recent ramp-up of its logistics footprint outlined earlier in this report, together with its
initiation of this service in the UK, would appear to point in this direction.
In the UK, Press reports suggest Amazon’s delivery pricing is ‘keen’, which is perhaps
unsurprising given Amazon’s track record of recouping shipping costs less than fully.
Figure 38: Amazon shipping revenue as % of shipping costs, 2000 to 2020
120%
98.9%
94.9%
90.2%
100%
73.2%
68.1%
68.1%
64.1%
63.0%
Shipping costs %
80%
57.0%
56.5%
55.5%
55.5%
54.1%
52.1%
51.5%
48.9%
46.7%
46.3%
44.4%
41.8%
60%
38.9%
40%
20%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Amazon’s shipping cost as % of online product sales has accelerated in recent years,
which would appear consistent with a desire to broaden its US delivery platform.
Figure 39: Amazon net shipping cost as % of product sales (exc. physical stores)
17.8%
20%
18%
13.5%
16%
14%
9.9%
Net shipping cost %
8.8%
12%
7.6%
10%
6.3%
6.0%
5.8%
5.8%
5.5%
8%
4.5%
3.8%
3.3%
3.0%
2.9%
2.8%
2.8%
6%
2.6%
1.0%
4%
0.6%
0.1%
2%
0%
-2%
-4%
-6%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

(5) Evidence that Amazon volumes are highly profitable for incumbents
Whilst in Office, former President Donald Trump was a scathing critic of Amazon’s use
of USPS for fulfilling deliveries. In March 2018 he labelled USPS Amazon’s “delivery
boy”, arguing it was “causing tremendous loss to the US.” In April 2020 Mr. Trump said
that every time USPS sends a package “they lose money on it”, insisting that USPS
should quadruple its rates.
But documentation released by USPS to non-profit organisation American Oversight in

response to a Freedom of Information request suggests Amazon volumes are actually
highly profitable. Specifically, during FY19 the documents suggest that the USD3.9bn
of revenue that USPS received from Amazon contributed USD1.6bn of ‘profits’, equal
to a 41% margin.
While such a margin may appear unrealistically high, and indeed it is not clear which
measure of ‘profit’ is being referred to, it does make more sense when one considers
that 75% of the parcels that USPS delivers on behalf of Amazon are last mile only – i.e.
Amazon handles the logistics and fulfilment parts of the value chain itself before
delivering the parcels to the applicable USPS local Destination Delivery Unit.
The released documents further state that “USPS derives incremental margin dollars
from every parcel, for every product, for every customer. Package business (both last-
mile and full-network) represents a net improvement in profitability for USPS versus a
detractor.”
As shown below, the documents suggest that the share of Amazon volumes that it self-
delivered rose from 13% in 2017 to 44% in 2019. Of the 56% of volume delivered by
other operators in 2019, USPS dominated, accounting for almost two-thirds of the total.
Of the stocks under our coverage, UPS is most exposed. Of course, FedEx parted
ways with Amazon in 2019, meaning its exposure has been zero since 2020.
Figure 40: Share of Amazon volumes by delivery operator, %, 2017-2019
100% 3%
8% 5%
90% 17%
17%
80% 21%
Share of Amazon volume (%)
70%
60% 35%
FedEx and others
50% 51%
UPS
40% 58% USPS
30% Amazon
20% 44%
27%
10%
13%
0%
2017 2018 2019
Source: American Oversight, USPS, Exane BNP Paribas estimates

Lessons from Europe
Could US Domestic margins gravitate to European levels?

Unlike the US Domestic delivery market which has been a three-player oligopoly for a
long time (i.e. until Amazon entered the fray in recent years), the European parcel
delivery market has been highly competitive for at least the past two decades. As
shown below, UPS’ US Domestic margin was streets ahead of the pan-European
operators DPD and GLS until 2017, when Amazon started to gain critical mass. Since
this time, the margins have increasingly become similar.
Figure 41: EBIT margin comparison for UPS US Domestic Package vs. DPD/GLS
(Europe), 2011 to post-2020
16%
14%
12%
EBIT margin % (adjusted)
10%
US: UPS Domestic
Package
8%
Europe: DPD/GLS
6%
4%
2%
0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
UPS’ US margin increasingly resembles its ex-US Domestic margin

UPS’ US Domestic Package margin has also increasingly started to resemble the
margin that we estimate is earned by its International Domestic operations – i.e. its
domestic delivery operations based outside of the US (primarily in Europe/Canada).
Figure 42: UPS EBIT margin comparison: US Domestic Package vs. International
Domestic Package, 2010 to 2020E
16%
14%
12%
10% US Domestic
8%
International
Domestic
6%
The EBIT margin produced by
4% US Domestic increasingly
resembles that of UPS'
2% International Domestic
operations
0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E
Source: Exane BNP Paribas estimates based on company data

The margins produced by DPD and GLS have been extremely stable...
Analysis of the margins earned by DPD and GLS in Europe reveals an impressive
degree of stability throughout the past 1.5 decades.
Figure 43: DPD and GLS EBIT margin % (adjusted), 2005 to 2019
12%
10%
8%
EBIT margin %
6% DPD
GLS
4%
The EBIT margins produced by DPD
and GLS have consistently ranged
2% within a 5-8% range, but gradually
been diluted from the upper end of
this range to the lower end
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
...as have the respective unit profitabilities

The unit profitability of these businesses has also been stable, which reflects the high
degree of predictability of unit costs. This is primarily enabled by most of the cost – i.e.
the pick-up and delivery – being outsourced, with a fixed fee per item paid.
Under this cost structure, so long as the parcel operators have a competitive unit cost,
charging revenue per parcel that ensures an appropriate level of unit profitability is a
reasonably straightforward calculation.
In our view, the possibility that the margins earned by UPS and FedEx in the Domestic
US market will converge to European levels (i.e. the 6-7% level typically seen by
DPD/GLS) cannot be ruled out.
Figure 44: The average EBIT par parcel earned by DPD and GLS has remained impressively stable
DPD average EBIT per parcel (Euros), 2010 to 2019 GLS average EBIT per parcel (Euros), 2010 to 2019
0.45 0.45 0.42

0.40 0.40 0.39 0.40
0.39
0.40 0.40 0.37 0.38
0.36 0.36
0.35 0.35 0.35
0.35 0.34 0.35 0.32 0.32 0.32 0.32
0.30 0.28 0.30
0.27
0.25 0.25
Euros
Euros
0.20 0.20
0.15 0.15
0.10 0.10
0.05 0.05
0.00 0.00
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Company data, Exane BNP Paribas

Earnings outlook
Even with volume benefits from Covid, UPS US Domestic produced no

EBIT growth in a decade
When thinking about the outlook for US Domestic earnings, it is first useful to consider
performance over the past decade – especially in light of our analysis that suggests
competitive pressure from Amazon could intensify.
While FedEx does not specifically disclose the profitability of its US operations, UPS
does so for its US Domestic Package division. As shown below, despite the benefits
that Covid provided this business with during 2020, adjusted EBIT was actually slightly
lower than in 2011 – representing no growth in a decade.
Figure 45: UPS EBIT (adjusted) by division: US Domestic Package vs.

International Package, 2010 to 2020
While US Domestic was
6,000 strong during H2 2020,
EBIT for 2020 overall
was below that seen in
5,000 2011 - representing no
growth in a decade
4,000
USD million
3,000 US Domestic Package

International Package
2,000
1,000
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
The EBIT margin of this business has progressively weakened over the past two
decades, reaching a new low of 7.7% in 2020.
Figure 46: UPS US Domestic Package adjusted EBIT margin %, 2000 to 2020
16.4%
16.2%
15.7%
15.4%
18%
15.1%
14.9%
13.8%
13.5%
13.5%
16%
13.1%
13.1%
12.9%
12.6%
12.6%
12.5%
12.1%
14%
11.0%
12%
EBIT margin %
9.4%
8.9%
8.2%
7.7%
10%
8%
6%
4%
2%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Amazon comprised 13% of UPS’ total revenue in 2020, but closer to 21%
of US Domestic specifically
For 2019 and 2020, UPS has disclosed the share of revenue provided by Amazon, at
11.6% and 13.3% respectively. However this almost entirely relates to UPS’ US
Domestic Package division, equating to revenue shares of 18.5% and 21.0%
respectively on this basis. In the context of our previous analysis that summarises the
recent step-up in Amazon Logistics’ scale, we consider the scale of UPS’ exposure a
concern.
Figure 47: Amazon share of UPS revenue; (i) as % of Group revenue; and (ii) as %
of US Domestic revenue, 2019-2020
25%
21.0%
20% 18.5%
15% 13.3%
% of Total
11.6% Group
US Domestic
10%
5%
0%
2019 2020
The sell-side appears comfortable that Amazon’s delivery ambitions will

not impact revenues...
Consensus sell-side forecasts do not appear concerned with either Amazon risk or
indeed the risk of a volume slowdown as stimulus cheque and inventory benefits ease.
Even after what was a relatively strong 2020, consensus forecasts that US Domestic
Package revenue will rise by +28% during 2020-2024E.
Figure 48: UPS US Domestic Package revenue breakdown, including Visible

Alpha consensus forecasts for 2021-2024E
80
68.3
62.4
59.5
70
56.1
53.5
60
46.5
43.6
40.8
50
38.3
USD billion
36.7
35.9
Deferred
34.1
32.9
31.7
40
Next Day Air
30 Ground
20
10
0
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2024E
Source: Company data, Visible Alpha

…with consensus forecasting ongoing margin expansion for both UPS
and FedEx
Focusing on UPS’ US Domestic next-day segment specifically, it is noticeable that
consensus assumes a particularly sharp acceleration in revenues during 2021-2024E –
quite a contrast versus the prior decade, during which revenues declined. Given that
this segment is likely to be impacted by the ongoing ramp-up of Amazon Air, these
forecasts appear optimistic in our view. In light of our Amazon analysis, the consensus
expectation that UPS’ US Domestic Package margin will now improve (following two
decades of decline) also appears hopeful.
Figure 49: UPS’ US next-day revenues – the segment most likely to be impacted by Amazon – are expected
to grow rapidly, while US Domestic margins are expected to improve after years of decline
UPS US Next Day Air revenue, including Visible Alpha UPS US Domestic Package operating margin (adjusted),
consensus forecasts for 2021-2024E including Visible Alpha consensus forecasts for 2021-2024E
6.5
13.8%
7.0 16%
13.5%
13.5%
13.1%
12.9%
12.6%
6.0
12.1%
14%
5.5
6.0
5.1
4.9
4.9
4.8
12%
4.6
4.5
4.5
9.6%
9.6%
5.0
9.4%
4.4
9.2%
4.3
Operating margin %
9.0%
8.9%
4.1
3.9
10%
7.7%
USD billion
4.0
8%
3.0
6%
2.0
4%
1.0 2%
0.0 0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2024E
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2024E
For FedEx, consensus expects that Express revenues (which include international as
well as US Domestic operations) will see robust growth during FY22-FY23, with the
operating margin rising to 9.2% in FY23 – a level only marginally short of the historic
peak of 9.5% seen in 2016.
Figure 50: For FedEx Express, consensus expects margin to revert back to a near-peak level
FedEx Express division revenue, including Visible Alpha FedEx Express division operating margin (adjusted), including
consensus forecasts for FY21-FY24E Visible Alpha consensus forecasts for FY21-FY24E
9.5%
9.2%
45.0
8.8%
50.0 10%
43.3
8.2%
8.2%
41.6
45.0 9%
7.6%
37.3
36.2
35.5
6.8%
6.7%
40.0 8%
33.8
35.0 7%
27.2
27.2
5.3%
27.1
26.5
26.5
5.1%
5.0%
EBIT margin %
24.6
USD billion
30.0 6%
4.0%
3.8%
25.0 5%
20.0 4%
15.0 3%
10.0 2%
5.0 1%
0.0 0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E

Similar to FedEx Express, consensus also assumes robust revenue growth during
FY22-FY23 for FedEx Ground. Expectations for the operating margin are also buoyant,
with a significant recovery expected after years of decline.
Figure 51: FedEx Ground margins are expected to ‘hockey stick’ following years of decline
FedEx Ground division revenue, including Visible Alpha FedEx Ground division operating margin (adjusted), including
consensus forecasts for FY21-FY24E Visible Alpha consensus forecasts for FY21-FY24E
18.4%
17.8%
17.4%
40.0 20%
16.7%
34.3
15.6%
32.4
15.3%
35.0 18%
30.2
14.2%
13.8%
13.1%
12.9%
16%
30.0
11.7%
22.7 14%
10.2%
20.5
EBIT margin %
25.0
USD billion
12%
18.4
8.9%
16.6
16.5
20.0 10%
13.0
11.6
8%
10.6
15.0
9.6
6%
8.5
10.0
4%
5.0 2%
0.0 0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
EBNPP vs. consensus

For UPS’ US Domestic Package division, our EBIT forecasts progressively diverge
versus consensus over the duration of our forecast period to 2024E.
Figure 52: UPS US Domestic Package division: EBNPP vs. consensus
US Domestic Package (USDm) FY20 FY21 FY22 FY23 FY24

Operating profit: EBNPP 4,128 4,948 5,248 5,248 5,565
Operating profit: consensus 4,128 5,064 5,495 5,967 6,545
EBNPP vs. consensus 0% -2% -4% -12% -15%
Source: Visible Alpha, Exane BNP Paribas estimates
This progressive divergence is also true for FedEx, with the differential between our
EBIT forecasts and that of consensus rising over time, to -11% for FedEx Ground in
FY24 and -13% for FedEx Express.
Figure 53: FedEx Ground & FedEx Express: EBNPP vs. consensus
USDm FY20 FY21 FY22 FY23 FY24

FedEx Ground
FedEx Express
EBNPP vs. consensus 4% 4% 2% -10% -13%

International

Volume outlook: US
US exposure has been helpful for UPS/FDX in recent quarters…

During the second half of 2020, both UPS and FedEx reported international export
volume growth significantly ahead of DHL Express – we believe helped by the US
integrators’ higher exposure to the United States.
Figure 54: YoY change in International export packages handled by DHL Express,
FedEx and UPS, calendar year Q1 2020 to Q4 2020
30% The growth recorded by UPS amd FedEx

during H2 2020 was ahead of that seen
by DHL Express - we believe helped by
25% higher US exposure
20%
YoY change %
Q1 2020
15%
Q2 2020
10% Q3 2020
Q4 2020
5%
0%
(5%)
DHL Express FedEx UPS
While UPS and FedEx do not specifically disclose volumes for their US-specific
International Package volumes, data is available for their main respective air hubs of
Louisville and Memphis. As shown below, the combined international (i.e. US-Rest of
World) volumes handled by these hubs has soared in recent months, with growth of
+22% during June 2020 to February 2021. Prior to Covid, the corresponding growth
rate had been negative for most of the past 18 months.
Figure 55: YoY change in International (i.e. US-Rest of World) volumes handled
by FedEx/UPS and Memphis/Louisville (by weight), January 2018 to February
2021
40%
35%
The combined International volumes
30% of FDX/UPS handled at
25% Memphis/Louisville grew by +22%
during 9 months from June-2020 to
20% February-2021
YoY change %
15%
10%
5%
0%
-5%
-10%
-15%
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Oct-18
Oct-19
Oct-20
Apr-18
Apr-19
Apr-20

…but this appears unlikely to persist much longer
A decomposition of Memphis/Louisville International volumes between US imports and
US exports reveals a much stronger growth rate over the past nine months for imports
than exports. Given the government-funded stimulus cheques paid to US residents
since the Covid crisis began – of USD1,200 in March 2020, USD600 in December 2020
- this disparity is unsurprising.
Figure 56: FedEx/UPS International volumes in recent months have primarily been driven by US import
strength
YoY change in International import volumes handled by YoY change in International export volumes handled by
FedEx/UPS at Memphis/Louisville (by weight), January 2018 FedEx/UPS at Memphis/Louisville (by weight), January 2018
to February 2021 to February 2021
50% 50%
40% 40%
30% 30%
YoY change %
YoY change %
20% 20%
10% 10%
0% 0%
-10% -10%
-20% -20%
-30% -30%
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Oct-18
Oct-19
Oct-20
Oct-18
Oct-19
Oct-20
Apr-18
Apr-19
Apr-20
Apr-18
Apr-19
Apr-20
Given that a third stimulus cheque of USD1,400 per person was paid in recent weeks
under President Biden, the likelihood that US imports will remain robust during the
remainder of H1 2021 appears high. Nonetheless survey data suggests US residents
are more likely to use their third stimulus cheque in a way that do not involve spend on
physical goods – most notably savings, stock market investments or vacations.
Figure 57: Percentage point change in how US respondents plan to spend their
third stimulus cheque, versus how they spent their first stimulus cheque
Source: Bloomberg, Exane BNP Paribas

Looking beyond H1 2021, when the benefit of stimulus cheque spending has faded, the
likelihood that the US International export volumes will flat-line – or potentially even pull
back to some extent – appears reasonably high.
As shown below, during the eight years prior to Covid, the US import/export volumes
handled by the integrators did not see much growth. While there was a slight bounce in
2017, this was primarily driven by FedEx’s acquisition of TNT.
Figure 58: US air freight volume handled by UPS/FDX/DHL, rolling 12 months,

January 2012 to September 2020 (by weight)
Other than the upward moves caused by
2,500 FedEx's acquisition of TNT, and then Covid, US
international parcel volumes have seen little
growth over the past decade
2,000
Tonnes ('000)
1,500 Canada
Latam
1,000 Asia
Europe
500
0
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Source: US government, Exane BNP Paribas estimates
During 2012 to 2019, even without removing the additional volume provided by FedEx’s
acquisition of TNT, the overall CAGR was just +2.4%. Adjusted for TNT, we estimate
the corresponding CAGR would be closer to zero.
Figure 59: CAGR of US air freight volume handled by UPS/FDX/DHL, by region,

2012 to 2019 (by weight)
3.5%
3.1%
3.0%
2.5%
2.5%
2.0%
CAGR
1.5% 1.3%
1.0%
0.6%
0.5%
0.0%
Asia Europe Latam Canada
Source: Exane BNP Paribas estimates based on US government data

Volumes show no sign of ‘kicking on’ after Covid boost…
Looking at the International volumes handled by FedEx and UPS at Memphis/Louisville
respectively, it would appear that following the initial Covid-driven bounce, volumes
have broadly stabilised. If this does prove to be the case, it appears likely that volume
growth will fade significantly from June 2021, when year-on-year comps become much
tougher.
Figure 60: International volumes handled by FedEx/UPS at Memphis/Louisville

(Tonnes ‘000), January 2018 to February 2021
800
The International volumes
handled by FDX/UPS
750 appear to have plateaued
since taking a large step-up
in mid-2020
700
Tonnes ('000)
650
600
550
500
Jan-18
Jul-18
Jan-19
Jul-19
Jan-20
Jul-20
Jan-21
Oct-18
Oct-19
Oct-20
Apr-18
Apr-19
Apr-20
While the above chart shows that volumes faded significantly during January/February
2021, it is important to note that this was caused by normal seasonality (due to the
combination of Christmas and New Year).
If we compare combined January/February volumes with the combined volume seen in

November/December of the prior year, the reduction of -15.0% seen in 2021 is not
unusual versus prior years.
Figure 61: Change in International volumes handled by FedEx/UPS at

Memphis/Louisville (Tonnes ‘000); January/February vs. November/December of
prior year, 2014 to 2021
0%
-5%
-10%
Jan/Feb vs. Nov/Dec
-15%
-15.2% -15.0%
-16.2%
-20% -17.4% -18.0%
-19.3%
-25%
The pullback in volume seen
-26.1% during Jan/Feb was driven by
-30% seasonality, rather than any
-29.3% underlying weakness
-35%
2014
2015
2016
2017
2018
2019
2020
2021

…while volume benefits from low inventories are unlikely to increase
The recent reduction in the US Retail inventories-to-sales ratio is well-known by
investors, and without question one of the reasons why the volume of international
packages shipped into the US by UPS/FedEx has been so strong over recent months.
Unlike the Retail inventories-to-sales ratio, Total Business inventories-to-sales is not
quite at an historic trough, but is low nonetheless.
Figure 62: US Retail sector inventories-to-sales is the lowest on record, albeit this is not the case for Total
Business inventories
US Retail sector inventories-to-sales ratio, January 1992 to US Total Business inventories-to-sales ratio, January 1992 to
January 2021 January 2021
1.80 1.70
1.70 1.60
1.60
Inventories-to-sales
Inventories-to-sales
1.50
1.50
1.40
1.40
1.30
1.30 US Retail inventories-to-sales currently
stand at the lowest level on record on
1.20 The US Total business inventory-to-sales
1.20 an absolute basis...
ratio is low, but not rthe lowest on record
1.10 1.10
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Jan-16
Jan-18
Jan-20
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Jan-14
Jan-16
Jan-18
Jan-20
Source: US Census Bureau, Exane BNP Paribas
A ‘zoomed-in’ view of US Retail sector inventories and sales reveals that while
inventory levels are low, the bigger driver of the trough inventories-to-sales ratio is high
sales. During January 2021, Retail inventories were just 6% below the January 2020
level, while Retail sales were 13% above.
It is very difficult to estimate when US inventories-to-sales ratios will return to a more

normalised level, but towards the end of this year certainly appears possible if Retail
inventories continued to build at the pace seen since June-2020. We do think that
volume benefits from low inventory levels are unlikely to increase, however.
Figure 63: US Retail sector inventories and sales (USDbn), Jan-2019 to Jan-2021
700 600
680
500
660
Inventories (USD billion)
Sales (USD billion)
640 400
620
300
600
580 200
If retail inventories rise at the same pace
560 seen since mid-2020 during the remainder of
2021, the Retail inventories-to-sales ratio 100
540
may be back towards a more normalised
520 0
Oct-19
Oct-20
Jan-19
Apr-19
Jul-19
Jan-20
Apr-20
Jul-20
Jan-21
Inventories Sales
Source: US Census Bureau, Exane BNP Paribas

Competition outlook: US
The Americas is the most concentrated of the International markets

Based on data that we have for 2009-2016, the Americas (for which volumes are of
course dominated by the US) was the most concentrated of the world’s major regions
from a Time Definite International perspective, with a Herfindahl index of 0.34 in 2016.
Figure 64: Herfindahl indices for the TDI (Time Definite International) markets of
Americas, Middle East & Africa, Asia Pacific and Europe
0.45
0.40
Herfindahl index (Top-4 operators)
0.35
0.30 Americas
0.25 MEA
0.20 Asia Pacific

Europe
0.15
0.10
0.05
0.00
2009
2010
2011
2012
2013
2014
2015
2016
The first chart below shows that after FedEx’s acquisition of TNT, 97% of Americas TDI
volumes were handled by FedEx, UPS and DHL Express.
While the Herfindahl Index declined from 0.408 in 2009 to 0.343 in 2016, the
conclusion remains that the US International parcel market is highly concentrated.
Figure 65: Overview of TDI volumes and Herfindahl indices by region, 2009 to 2016
Americas International Express market shares by operator, Americas International Express Herfinfdahl index, Top-4
2009-2016 operators, 2009-2016
100% 3% 3% 3% 3% 3% 3% 3% 3% 0.45
0.408
0.40 0.380
0.366 0.356
0.347 0.344 0.341 0.343
80% 0.35
Herfindahl index (Top-4)
46% 46% 45% 44%

51% 50% 48%
57% 0.30
60% Other
0.25
1% 1% 1% FedEx
1% 1%
1% 0.20
TNT
40% 0%
33%
32% 32% 31% UPS 0.15
30% 31%
24% 32%
DHL 0.10
20%
0.05
16% 13% 16% 17% 18% 19% 19% 20%
0% 0.00
2009
2010
2011
2012
2013
2014
2015
2016
2009
2010
2011
2012
2013
2014
2015
2016

...but this does not mean FDX/UPS have it all their own way
While FedEx and UPS are by far the largest players in the US International package
market, it is important to understand that DHL Express has been a significant thorn in
their side over recent years.
As shown in the chart below, our analysis of industry data suggests that DHL Express
doubled its market share of US international package volumes over the past decade -
almost entirely at the expense of FedEx/UPS.
Figure 66: Market shares of FedEx, UPS and DHL of US airborne trade with Rest
of world (by weight), rolling 12 months
60%
50%
Market share %
40%
FDX
30%
UPS
DHL
20%
10%
0%
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Source: US government, Exane BNP Paribas estimates
Interestingly, yield data provided by Deutsche Post suggests DHL Express’ market
share gains were not driven by price. As shown below, DHL Express’ constant currency
yield for its Americas TDI volumes has generally risen in recent years.
Figure 67: Indices of DHL Express TDI yield (constant currency), broken out by
region, Q1 2014 to Q4 2020
115
110
105
Index (base = 100)
100 Americas
95 Asia Pacific
Europe
90
MEA
85
80
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2014 2015 2016 2017 2018 2019 2020

As shown in the chart below, DHL Express has made sustained market share gains on
the US trade routes with both Asia and Europe.
Figure 68: Volume shares of FedEx, UPS and DHL for US international trade with
Asia (by weight), rolling 12 months
60%
50%
40%
Market share %
FDX
30%
UPS
DHL
20%
10%
0%
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Source: Industry Data, Exane BNP Paribas estimates
Figure 69: Volume shares of FedEx, UPS and DHL for US international trade with
Europe (by weight), rolling 12 months
60%
50%
40%
Market share %
FDX
30% UPS
DHL
20%
10%
0%
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Source: Industry Data, Exane BNP Paribas estimates

Volume outlook: ex-US
Volume growth has been robust rather than remarkable...

We often hear that cross-border parcel volumes are seeing much stronger growth rates
than domestic volumes. Yet our analysis does not particularly substantiate this view. As
shown below, the International export volumes handled by DHL Express/UPS/FedEx
have grown at a very similar rate to their domestic parcel volumes (i.e. in the US for
UPS/FDX, and Germany for Deutsche Post).
Figure 70: Indices of the International Export and Domestic parcel volumes
(US/Germany) handled by DHL/FedEx/UPS, rolling 12 months, Q1 2012 to Q4
2020
180
170
160
150
Index (base = 100)
140
130 International Export
120 US/Europe Domestic
110
100
90
80
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2012 2013 2014 2015 2016 2017 2018 2019 2020
During the decade prior to Covid, the average annual growth rate of the international
export volumes handled by the three integrators was +5.5%; robust rather than
remarkable.
Figure 71: YoY change of the total International export volumes handled by DHL
Express, FedEx and UPS, Q1 2011 to Q4 2020
23%
25%
18%
20%
15%
12%
11%
YoY change %
10%
10%
10%
9%
9%
9%
9%
8%
8%
10%
7%
7%
5%
5%
5%
5%
5%
5%
5%
5%
4%
4%
3%
5%
2%
2%
2%
1%
1%
1%
1%
1%
0%
0%
0%
0%
0%
Q2 0%
Q3 -1%
-5%
Q1
Q2
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q3
Q4
Q1
Q2
Q3
Q4
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

...indeed FedEx has barely seen any growth at all
While DHL Express and UPS have both seen their international export volumes grow
well over the past decade, FedEx (on a TNT-adjusted basis) has not. As shown in the
chart below, on a rolling 12-month basis FedEx’s international export volumes showed
barely any growth between 2012 and H1 2020.
Figure 72: International Export packages handled by DHL Express and UPS,
rolling 12 months, Q1 2012 to Q4 2020
450
400
350
Packages (million)
300
UPS
250
DHL Express
200
FedEx
150
100
50
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Exane BNP Paribas estimates
The growth trajectory enjoyed by DHL Express and UPS with respect to international
export packages has been broadly similar, with DHL Express outperforming slightly
pre-Covid and UPS outperforming slightly post-Covid. Relative to FedEx, we believe
there are two main reasons for this volume outperformance. Firstly, neither DHL
Express nor UPS have had any distractions from M&A, and secondly (and we think
more importantly), DHL Express and UPS have been more focused on B2C.
Figure 73: Indices of number of International Export packages handled by DHL

Express and UPS, rolling 12 months, Q1 2012 to Q4 2020
200
180
Index (base = 100)
160
140 DHL Express
UPS
120
100
80
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2012 2013 2014 2015 2016 2017 2018 2019 2020

B2C penetration should continue to ensure robust volume growth
Unlike the International US market, where we envisage a slowdown when recent
benefits from stimulus cheques and inventory rebuild ease, we have no reason to
expect any such weakness on ex-US routes.
The below data from the UK shows how the propensity of consumers to buy from
abroad has increased rapidly in recent years, but that overall penetration rates remain
quite low.
Figure 74: Adults (aged 16+) in Great Britain who purchased via the internet in
the last 12 months; from other EU countries and rest of the world
45%
39%
40%
35%
33%
33%
31%
31%
35%
28%
27%
30%
25%
24%
23%
Sellers from other
% of Adults
21%
25% EU countries
19%
18%
18%
17%
17%
17%
20% Sellers from the

15%
14%
rest of world
15%
10%
5%
0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Data provided by DHL Express shows how it has successfully rode this wave, with the
B2C share of TDI volumes more than quadrupling from 10% in 2013 to 45% in 2020.
Figure 75: DHL Express TDI shipments per day, B2B vs. B2C %, 2013 to 2020
100%
10% 13% 17% 20% 23% 27% 30%
80%
45%
60%
% of Total
B2C
90% B2B
87% 83%
40% 80% 77% 73% 70%
55%
20%
0%
2013
2014
2015
2016
2017
2018
2019
2020

One of the most interesting insights provided by DHL Express’ B2C volume split is what
this equates to for absolute volumes. As shown below, while the TDI volume mix
between B2C and B2B has changed significantly over the past decade, volumes have
nonetheless grown in a near-linear manner.
Figure 76: DHL Express TDI shipments per day, split by B2C and B2B, 2010 to
2020
1,200
DHL Express' TDI volumes
followed a near-linear trajectory
1,000 over the past decade despite a
variety of macro fluctuations
Shipments per day ('000)
308
494
258
209
800
162
126
92
B2C
64
600
53
43
B2B
34
400
704
700
682
649
628
604
601
579
540
497
457
200
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
The implied year-on-year growth of DHL Express’ B2C shipments progressively

softened during 2014-2019 before the Covid-driven spike of 2020. Growth in B2B
shipments during 2014-2019, in contrast, averaged just 3%.
From a 2021 perspective, the good news is that following the -14% reduction in B2B
volumes seen during 2020, YoY growth did return to positive territory in Q4 (which saw
growth of +3%), paving the way for a robust rebound in 2021.
Figure 77: YoY change in DHL Express TDI shipments; B2C vs. B2B, 2014 to
2020E
70%
61%
60%
50% 44%
40% 36%
29% 29%
YoY change %
30% 23%
19% B2B
20%
5% B2C
10% 4% 5% 3% 3% 1%
0%
-10%
-20% -14%
-30%
2014
2015
2016
2017
2018
2019
2020

Competition outlook: ex-US
Similar to the Americas, both Europe and Asia Pacific are highly
concentrated...
As shown previously, on a global basis the Americas market ranks as the most
concentrated.
But the European and Asian Pacific markets also have high levels of concentration in
their own right, with near-identical Herfindahl indices of 0.295 and 0.299 in 2016, the
most recent year for which we have comprehensive data.
For context, a Herfindahl index of >0.15 ranks as ‘Moderately concentrated’, while a

Herfindahl of >0.25 ranks as ‘Highly concentrated.’
Figure 78: Overview of TDI volumes and Herfindahl indices by region, 2009 to 2016
Europe International Express market shares by operator, Europe International Express Herfinfdahl index, Top-4
2009-2016 operators, 2009-2016
100% 0.45
14% 12% 12% 12% 12% 12% 12% 11%
0.40
10%
80% 10% 11% 10% 10% 10% 10%
21% 0.35
14% 13% 12% 12% 12% 0.295

16% 16% 0.30 0.266
60% Other 0.251 0.253 0.255 0.260
24% 24% 0.25 0.225 0.235
23% 24% 25% 25% FedEx
23% 23%
TNT 0.20
40%
UPS 0.15
DHL 0.10
42% 43% 44%
20% 37% 38% 41% 41% 41%
0.05
0% 0.00
2009
2010
2011
2012
2013
2014
2015
2016
2009
2010
2011
2012
2013
2014
2015
2016
Asia Pacific International Express market shares by operator, Asia Pacific International Express Herfinfdahl index, Top-4
2009-2016 operators, 2009-2016
100% 0.45
17%
23% 21% 20% 20% 0.40
29% 27% 24%
80% 0.35
15%
0.299
21% 20% 19% 19% 0.30
21% 0.272
0.259
60% 21% 21% 4% 19%
Other 0.247
4% 4% 0.25 0.231
5% 5% 11% 10% FedEx 0.217
7% 6% 10% 11% 11% 0.187
TNT 0.20 0.174
40% 10% 10%
UPS 0.15
46% 47% 49% DHL 0.10

20% 40% 42% 44%
34% 36%
0.05
0% 0.00
2009
2010
2011
2012
2013
2014
2015
2016
2009
2010
2011
2012
2013
2014
2015
2016

...indeed trade route-specific data reveals Herfindahl indices of >0.4
Given that the previous page summarises market share data for entire regions, the
Herfindahl indices tend to understate concentration levels, for which trade lane-specific
calculations are more representative of the underlying competition dynamic.
The below data from 2016 shows how the Herfindahl indices for routes between
Europe and the rest of the world stand above 0.4 for all regions other than North
America.
Figure 79: Herfindahl indices of Extra-EU express routes by region; before and
after FedEx acquisition of TNT
0.60
Post-FDX/TNT 0.52
0.55
Pre-FDX/TNT
0.50 0.44
0.43 0.43 0.43
0.45 High
0.40 concentration
Herfindahl Index
0.34
0.35
0.30
0.25
0.20 Moderate
concentration
0.15
0.10 Low
0.05 concentration
0.00
Middle
Pacific
America
Europe
America
Africa
Rest of
East
Asia
South
North
Source: EU, Exane BNP Paribas estimates
Calculated on a country-specific basis, Herfindahl indices are presented below for; (i)
Intra-Europe; (ii) Europe-Asia; and (iii) Europe-North America.
Figure 80: Country-specific Herfindahl indices for Intra-Europe routes, based on

2016 data post-FedEx acquisition of TNT
0.7
0.60
0.53
0.6
0.50
0.48
0.46
0.5 High
0.42
0.42
0.42
0.42
0.42
0.42
0.41
0.41
0.40
0.39
concentration
0.38
0.38
0.38
Herfindahl Index
0.37
0.37
0.36
0.36
0.36
0.36
0.36
0.35
0.35
0.35
0.35
0.34
0.4
0.3
0.2 Moderate
concentration
0.1 Low
concentration
0.0
Cyprus
Norway
Denmark
Romania
Italy
Spain
Ireland
Finland
Greece
Bulgaria
Croatia
Luxembourg
Iceland
Germany
UK
Netherlands
Malta
Latvia
Slovenia
Estonia
Poland
Austria
Lithuania
Belgium
Sweden
France
Czech Rep
Slovakia
Hungary
Portugal

Exane BNP Paribas Research
Herfindahl Index
Herfindahl Index
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Cyprus 0.33 Denmark 0.34

Ireland 0.34 Germany 0.35
Italy 0.34 Belgium 0.35
Spain 0.34
Global Integrators
Romania 0.36
Romania 0.34 UK 0.36
France 0.34 Netherlands 0.36
Netherlands 0.34 Poland 0.36
Lithuania 0.35 Sweden 0.36
Slovakia 0.35 Portugal 0.37
Greece 0.35 Malta 0.39
Estonia 0.36 France 0.39
Luxembourg 0.36 Italy 0.40

UK 0.36 Austria 0.40
Hungary 0.36 Czech Rep 0.40
Austria 0.37 Spain 0.41
Malta 0.37 Slovakia 0.42
Slovenia 0.37 Cyprus 0.42
2016 data post-FedEx acquisition of TNT
Latvia 0.37 Hungary 0.42

Denmark 0.38 Latvia 0.42
Bulgaria 0.38 Ireland 0.42
Finland 0.39 Slovenia 0.47
Portugal 0.39 Finland 0.47
Croatia 0.40 based on 2016 data post-FedEx acquisition of TNT Lithuania
Bulgaria
0.48
0.49
Belgium 0.40
Germany 0.40 Estonia 0.49
Norway 0.40 Greece 0.49
Iceland 0.42 Luxembourg 0.53
Czech Rep 0.44 Norway 0.53
Poland 0.45 Iceland 0.56
Sweden 0.45 Croatia 0.56
Low
High
Low
High
Moderate
Moderate
concentration
concentration
concentration
concentration
concentration
concentration
Figure 81: Country-specific Herfindahl indices for Europe-Asia routes, based on
Figure 82: Country-specific Herfindahl indices for Europe-North America routes,
7 APRIL 2021
page 48
Post-2016 data suggests Europe has concentrated further
While we do not have comprehensive market share information for the period since
2016, data sets that we do have suggest the European market has continued to
concentrate - primarily due to DHL Express continuing to take share. As shown below,
airfreight volumes handled at Leipzig airport (DHL Express’ main European hub) have
consistently outpaced that of Cologne (UPS’ main European hub) since 2016.
Figure 83: Volume growth at Leipzig has outpaced Cologne in recent years, consistent with the view that
DHL Express has captured market share from UPS in Europe
Leipzig vs. Cologne air freight volume %, January 2010 to Indices of airfreight volumes handled at Leipzig and Cologne,
January 2021 rolling 12 months, January 2011 to January 2021
100% 210
190
80%
Index (base = 100)

170
60%
% of Total
150
40%
130
20%
110
0% 90
Nov-10
Nov-11
Nov-12
Nov-13
Nov-14
Nov-15
Nov-16
Nov-17
Nov-18
Nov-19
Nov-20
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Leipzig Cologne Leipzig Cologne
Source: Exane BNP Paribas estimates based on industry data
We note that this trend is true irrespective of whether we consider Intra-European or

Intercontinental (i.e. Europe-Rest of World) volumes.
Figure 84: Leipzig airfreight volumes have outpaced Cologne on both Intra-Europe and Intercontinental
routes
Indices of Leipzig vs. Cologne Intra-Europe air freight volume Indices of Leipzig vs. Cologne Intercontinental air freight
(by weight), rolling 12 months, since January 2011 volume (by weight), rolling 12 months, since January 2011
250 300
250
200
200
Index (base = 100)
Index (base = 100)
150
150
100
100
50
50
0 0
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

As shown on the next page, Leipzig volumes relative to Cologne have increased for
each of Europe’s main intercontinental trade routes other than Asia outbound.
Figure 85: Leipzig has captured share on most European intercontinental routes other than Asia outbound
Leipzig vs. Cologne Asia to Europe air freight share (Tonnes), Leipzig vs. Cologne Europe to Asia air freight share (Tonnes),
rolling 12 months rolling 12 months
100% 100%
80% 80%
60% 60%
% of Total
% of Total
40% 40%
20% 20%
0% 0%
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Leipzig vs. Cologne North America to Europe air freight share Leipzig vs. Cologne Europe to North America air freight share
(Tonnes), rolling 12 months (Tonnes), rolling 12 months
100% 100%
80% 80%
60% 60%
% of Total
% of Total
40% 40%
20% 20%
0% 0%
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

Leipzig vs. Cologne RoW (exc. Europe/North America) to Leipzig vs. Cologne Europe to RoW (exc. Europe/North
Europe air freight share (Tonnes), rolling 12 months America) air freight share (Tonnes), rolling 12 months
100% 100%
80% 80%
60% 60%
% of Total
% of Total
40% 40%
20% 20%
0% 0%
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

On Intra-European routes, the share of volumes handled by Leipzig relative to Cologne
has increased for slightly more than half of the countries served. However we note that
the markets where Leipzig has gained share tend to include the larger European
economies that account for a disproportionate share of volume (e.g. UK, France, Italy,
Spain and Poland).
Figure 86: Change in Leipzig airport freight volume share (vs. Leipzig/Cologne
total), 2011 to 2020 (pp)
Poland
Greece
UK
France
Italy
Spain
Switzerland
Austria
Turkey
Sweden
Slovakia
Netherlands
Finland
Hungary
Russia
Belgium
Denmark
Norway
Lithania
-30pp -20pp -10pp 0pp 10pp 20pp 30pp 40pp
Change in Leipzig share, 2011 to 2020 (pp)

During the 12 most recent months for which we have data, Leipzig had a greater
volume share than Cologne for all countries other than Turkey, France, Austria and
Sweden.
Figure 87: Leipzig vs. Cologne share of combined air freight volume by country,
12 months to January 2021
0%
0%
100%
4%
5%
6%
7%
8%
11%
18%
20%
20%
34%
36%
40%
80%
45%
51%
56%
66%
69%
60%
% of Total
100%
100%
Cologne %
96%
95%
94%
93%
92%
89%
82%
Leipzig %
80%
80%
40%
66%
64%
60%
55%
49%
44%
20%
34%
31%
0%
Spain
Poland
Turkey
Hungary
Belgium
Denmark
Norway
Slovakia
Netherlands
Greece
Finland
Russia
Italy
Switzerland
Lithania
UK
France
Austria
Sweden

Porter’s Five Forces help to illustrate why competition is limited
An overview of how Porter’s Five Forces relate to the International express industry
helps to explain why competition is likely to remain low, with low threat of new entrants,
limited bargaining power of customers/suppliers, and only moderate threat of
substitutes. Amazon is not included given that its delivery focus is domestic rather than
international – something we do not expect to change for the foreseeable future.
Figure 88: Relevance of Porter’s Forces for the International Express industry
Porter's Five Forces Strength Overview

Threat of new market entrants Low - Only three global players (integrators) since 2015; only four since 1970s
- High capital requirements / asset intensive network
- Economies of scale key to profitability
Threat of substitutes Moderate - For parcels the risk is low
- Documents set to increasingly become digital however
Bargaining power of customers Limited - Large number of SME/individual customers with limited buying power
- Complexity/risks of switching for large customers
- No substitute for express (urgent/high value) shipments
Bargaining power of suppliers Limited - Transportation (~40% of cost) = commoditised
- Employees (~29% of cost) = spread throughout the world, mainly customer-facing
- Fuel (~7% of cost) = recovered with the fuel surcharge
Industry rivalry Moderate - Global TDI market is relatively small

- FedEx and UPS capitalizing on strong US domestic market
- TNT taken out by FedEx
Source: DHL Express, Exane BNP Paribas
A visual overview of the Express industry’s operating chain helps to illustrate why the
threat of new entrants is low, showing the multiple journeys that each consignment
makes between customer and consignee. Given the time-sensitive nature of the
express business model, meaning aircraft and trucks need to depart at set times
irrespective of utilisation rates, the inherent operational leverage is obvious. Certainly,
any operator starting from scratch would expect to lose a huge amount of money
before achieving breakeven.
Figure 89: Express industry operating chain
Source: EU, Exane BNP Paribas (pp.17-18 of the FedEx-EU Express EC case)

…but some ‘International’ businesses are more international than others
In this section so far, our analysis has pertained to International Export specifically,
which comprises the bulk of DHL Express, UPS International Package and FedEx
Express’ International operations.
These businesses also include International Domestic operations, however, for which
competitive pressures are much more intense.
As shown below, we estimate that 18% of DHL Express revenue is comprised of

International Domestic or Other (specifically, its Air Cargo Services activities), while the
corresponding shares for UPS and FedEx are 24% and 25% respectively.
Figure 90: Inter-country vs. Domestic/Other revenues of DHL Express, UPS

International and FedEx International, 2020
100%
18%
24% 25%
80%
60%
% of Total
Domestic/Other
Inter-country
40% 82%
76% 75%
20%
0%
DHL Express UPS International FedEx International
Within UPS' International division, our analysis suggests the EBIT margin produced by
its Export operations is more than double that produced by its International Domestic
activities, as shown below.
Figure 91: UPS International Package EBIT margin comparison: International

Export vs. International Domestic, 2010 to 2020E
Within UPS' International division, our analysis suggests the EBIT
30% margin produced by its Export operations is more than double that
produced by its International Domestic activities
25%
20%
International
Export
15%
International
Domestic
10%
5%
0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020E

TNT is primarily a Domestic/Road business
While the exposure of FedEx’s International revenues to Domestic/Other is only slightly
greater than UPS, from a competition perspective there is a nuance. Specifically, a
large share of TNT’s International export revenue is comprised of road network
activities, for which we believe the level of competition is much more intense than
primarily air-based International export operations.
During 2014-2015, the most recent period for which divisional information is available,
TNT’s ~60% of ‘International’ revenue was primarily comprised of cross-border Road
networks, which we believe typically handled bulk/palletised cargo.
Figure 92: TNT Express revenue split by division, Q1 2014 to Q4 2015
100%
80% 41% 41% 41% 41% 41% 40% 40% 39%

% of Total
60% Domestics
14% 14% 15% 15% 15% 16% 16% 15%
International AMEA
40% International Europe
46% 45% 44% 43% 44% 44% 45% 45%

20%
0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2014 2015
Source: TNT Express, Exane BNP Paribas estimates
While much of the difference is explained by geographic exposure (FedEx’s

International operations are typically US intercontinental, whereas TNT is primarily
intra-Europe), TNT’s yields are significantly lower than those of FedEx.
Figure 93: FedEx vs. TNT standalone yield per lb (USD) for International Priority
Freight and International Economy Freight, 2017
2.5
2.2
2.2
2.2
2.2
2.0
1.5
Priority Freight: FedEx
Euros
Priority Freight: TNT

1.0
0.7
Economy Freight: TNT

0.6
0.6
0.6
0.6
0.6
0.6
0.5
0.5
0.0
Q1
Q2
Q3
Q4
2017

With FedEx’s integration of TNT largely complete, a key question at present is whether
this can enable a material step-up in profitability of FedEx Express. Based on our
analysis of TNT financials since the FedEx acquisition was completed, together with
our knowledge of TNT from when it was a listed stock, we doubt this will be the case.
The first reason is that on a pro-forma basis, our analysis suggests combined
TNT/FedEx package volumes only recovered to the pre-acquisition level in FY21,
which included significant Covid benefits.
Figure 94: FedEx Express division and TNT Express pro-forma daily packages
(’000), FY2013 to 2021E
1,200
1,000
Daily packages ('000)
800
TNT Express
600
FedEx
400
200
0
2013
2014
2015
2016
2017
2018
2019
2020
2021
The second reason is that TNT profitability has remained soft since the May 2016
acquisition, based on our estimates from subsidiary accounts.
Figure 95: TNT Express EBIT (adjusted), EUR million, 2000 to 2019E
700
580 599
600
474
500
369
400 322 322 325
300 223 228 249
192
EUR million
183 183
200
101 110
100 53 74
0
-100 -22
-200
-182
-300
-296
-400
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016E
2017E
2018E
2019E
Source: TNT, TNT Express, Exane BNP Paribas estimates

Some of this weakness was unquestionably caused by the June 2017 cyber-attack, but
the fact remains that TNT’s profitability (or synergies that FedEx can derive from TNT)
will need to improve considerably to swing the needle for FedEx group.
Figure 96: FedEx Express division and TNT Express pro-forma EBIT (adjusted),
FY2003 to FY2021E
4,000
3,500
3,000
2,500
USD million
2,000 TNT Express
1,500 FedEx
1,000
500
-500
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
While the lack of progress made at TNT since the May 2016 acquisition is well known,
it is important to recognise that TNT underperformance started well before this date. As
shown below, TNT Express struggled to grow revenues throughout the entirety of the
2010s.
This timeframe coincides almost exactly with the period during which DHL Express got
its act together, which we doubt was coincidence. This observation is consistent with
our view that much of the space in which TNT operates is highly competitive.
Figure 97: TNT Express revenue and EBIT (adjusted), 2000 to 2019E
TNT Express struggled to grow during the 2010s - exactly when
DHL Express got its act together. We doubt this was coincidence...
8,000 12%
7,000 10%
8%
EBIT, adjusted (EURm)
6,000
6%
5,000
4%
4,000
2%
3,000
0%
2,000 -2%
1,000 -4%
0 -6%
2016E
2017E
2018E
2019E
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Revenue EBIT margin % (adjusted)
Source: TNT, TNT Express, Exane BNP Paribas estimates

An overview of the EBIT margins produced by some of TNT’s largest countries is
provided below, showing how the downward trend in profitability throughout the 2010s
was seen across the business.
Figure 98: EBIT margins of a selection of TNT Express European subsidiaries
TNT Express UK EBIT margin %, 2002 to 2019 TNT Express France EBIT margin %, 2002 to 2019
10% 10%
8% 8%

6%
6%
4%
4%
2%
2%
0%
0%
-2%
-4% -2%
-6% -4%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
TNT Express Germany EBIT margin %, 2002 to 2019 TNT Express UK EBIT margin %, 2002 to 2019
20% 15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
-10% -10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
TNT Express Czech Republic EBIT margin %, 2002 to 2019 TNT Express Sweden EBIT margin %, 2002 to 2019
35% 20%
30%
15%
25%
20% 10%
15%
5%
10%
5% 0%
0%
-5%
-5%
-10% -10%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Earnings outlook
International EBIT has grown reliably throughout the past decade

To assess the International earnings outlook for the three integrators, it is first helpful to
understand the historic trajectory.
As shown below, the aggregate EBIT produced by DHL Express (which is dominated
by International export revenues) and UPS International Package grew steadily during
2010-2019 (by +6.1% CAGR, comprised of DHL Express +8.5% and UPS International
+4.5%). The subsequent profitability seen during H2 2020 – especially Q4 – was in a
different league than anything seen previously.
Figure 99: Aggregate EBIT (adjusted) of DHL Express and UPS International
(USDm), Q1 2010 to Q4 2020
2,500
2,000
USD million
1,500
UPS
1,000 DHL Express
500
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
While margins during Q3 and Q4 2020 did not increase to the same extent as EBIT,
they also reached record high levels by some distance.
Figure 100: Aggregate EBIT margin % (adjusted) of DHL Express and UPS
International (USDm), Q1 2010 to Q4 2020
25%
2010
2011
20%
2012
2013
15%
2014
2015
10%
2016
2017
5% 2018
2019
0% 2020
Q1 Q2 Q3 Q4

Given the large difference in profitability between H1 2020 and H2 2020, when
assessing consensus earnings expectations it is important to assess this on a quarterly
basis in the first instance.
Using 2019 as the base year for comparison, consensus forecasts that DHL Express
revenues will continue to rise during 2021-2022, even relative to the run-rate level seen
during Q3/Q4 2020. The EBIT margin, in contrast, is expected to decline from the
levels seen during H2 2020.
Figure 101: DHL Express margins are expected to decline from the levels seen during H2 2020…
DHL Express quarterly revenue (EUR billion), including DHL Express quarterly EBIT margin % (adjusted), including
consensus forecasts for 2021-2022E consensus forecasts for 2021-2022E
18.6%
17.6%
17.6%
6.5
7.0 20%
16.2%
6.0 18%
15.0%
5.6
14.2%
14.2%
6.0
5.4
13.9%
5.3
13.6%
13.6%
13.2%
5.1
16%
5.0
5.0
4.9
12.5%
12.3%
4.8
4.6
4.5
11.4%
5.0 14%
4.2
4.2
10.7%
4.2
4.0
EBIT margin % 12%
9.4%
EUR billion
4.0
10%
3.0
8%
2.0 6%
4%
1.0
2%
0.0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021E 2022E 2019 2020 2021E 2022E
Source: Company data, Visible Alpha, Exane BNP Paribas
For UPS International Package, consensus forecasts that revenues will stabilise at the
run-rate seen in H2 2020 during 2021. Similar to DHL Express, the operating margin in
2021-2022 is expected to decline relative to the level seen in H2 2020.
Figure 102: …which is also the case for UPS International Package
UPS International Package quarterly revenue (EUR billion), UPS International Package quarterly EBIT margin %
including consensus forecasts for 2021-2022E (adjusted), including consensus forecasts for 2021-2022E
6.0 30%
24.3%
23.8%
5.1
22.7%
22.5%
21.8%
4.8
4.7
21.5%
21.1%
21.0%
21.0%
20.8%
5.0 25%
19.8%
4.4
19.4%
4.2
19.0%
4.2
4.2
4.1
4.1
18.0%
4.0
17.7%
3.8
16.5%
3.7
Operating margin %
4.0 20%
3.5
3.5
3.5
3.4
USD billion
3.0 15%
2.0 10%
1.0 5%
0.0 0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2019 2020 2021E 2022E 2019 2020 2021E 2022E

On an annual basis, consensus forecasts that DHL Express’ EBIT margin will rise
slightly in 2021E before flat-lining from 2022E. Revenues are expected to follow a
similar trajectory to that seen during the period pre-Covid.
Figure 103: Consensus assumes that DHL Express’ EBIT margin will rise slightly in 2021E before flat-lining
DHL Express revenue (EUR billion), including consensus DHL Express EBIT margin % (adjusted), including consensus
forecasts for 2021-2024E forecasts for 2021-2024E
15.3%
15.2%
15.2%
15.1%
30.0 18%
14.5%
24.2
16%
22.9
21.7
12.1%
25.0
11.9%
11.8%
20.7
14%
11.0%
19.1
10.1%
10.1%
17.1
20.0 12%
16.1
EBIT margin %
9.1%
15.0
EUR billion
14.0
7.9%
7.9%
13.7
10%
12.8
12.7
12.5
7.1%
11.8
15.0
11.1
8%
10.0 6%
4%
5.0
2%
0.0 0%
2021E
2022E
2023E
2024E
2021E
2022E
2023E
2024E
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
For UPS International Package, consensus expects that the operating margin will trend
back down to the ~19% average level seen during 2015-2019 by 2024E. Expectations
of ongoing revenue growth mean that consensus operating income remains relatively
flat during 2021-2024E.
Figure 104: Consensus forecasts for UPS International package revenues are similar to that of DHL
Express, but margins are expected to revert back to pre-Covid levels
UPS International Package revenue (USD billion), including UPS International Package operating margin %, including
consensus forecasts for 2021-2024E consensus forecasts for 2021-2024E
22.2%
21.9%
25.0 25%
20.6%
20.0%
19.5%
19.5%
18.8%
18.7%
19.2
18.0%
18.0%
18.2
16.8%
17.5
20.0 20%
15.3%
16.4
14.9%
15.9
14.7%
14.5%
Operating margin %
14.4
14.2
13.3
13.0
12.4
12.4
15.0 15%
12.2
12.1
12.1
USD billion
11.1
10.0 10%
5.0 5%
0.0 0%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2024E
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2024E

FedEx
While we do not have consensus data for the International part of FedEx’s Express
division specifically, the majority of this division’s revenue has been derived from
outside of the United States since the TNT acquisition was completed on 25 May 2016
(just before the start of FedEx’s Fiscal year 2017).
Figure 105: FedEx Express division revenue, split between US and International
(USD billion), FY2010 to FY2021E
45.0
38.1
40.0 36.6
35.3 34.8
32.8
35.0
30.0
25.5 25.8 25.7 25.7 25.1
23.7 19.9 20.8
USD billion
25.0 21.0 19.7 18.7

18.0
International
20.0 11.7 12.0 11.9 11.7 10.8
10.9 US
9.2
15.0
10.0
16.7 16.0 17.3
14.3 14.8 15.6
5.0 11.8 12.9 13.8 13.8 13.7 14.0
0.0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
Consensus assumes that FedEx Express’ EBIT margin for FY2022 (June 2021-May
2022) will rise to 8.5%, before climbing once again to 9.2% for FY2023. Since 2011,
FedEx Express has exceeded this margin in just one year (2016).
Figure 106: FedEx Express revenues are expected to continue to grow robustly during FY22-FY23, with the
operating margin returning close to the 9.5% peak seen in FY16
FedEx Express revenue, including consensus forecasts for FedEx Express operating margin, including consensus
FY21-FY25E forecasts for FY21-FY25E
9.5%
9.2%
45.0
8.8%
50.0 10%
43.3
8.2%
8.2%
41.6
45.0 9%
7.6%
37.3
36.2
35.5
6.8%
6.7%
40.0 8%
33.8
35.0 7%
27.2
5.3%
27.2
27.1
26.5
26.5
5.1%
5.0%
EBIT margin %
24.6
USD billion
30.0 6%
4.0%
3.8%
25.0 5%
20.0 4%
15.0 3%
10.0 2%
5.0 1%
0.0 0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021E
2022E
2023E

EBNPP vs. consensus
For the more pure-play International businesses of UPS and Deutsche Post – UPS
International Package and DHL Express – our forecasts are broadly in-line with
consensus estimates throughout most of our forecast period to 2024E.
For UPS International Package, our 2022-2024E revenue forecasts are 5% below
consensus for each of these years, but our margin assumptions slightly ahead.
Figure 107: UPS International Package division: EBNPP vs. consensus

International Package (USDm) FY20 FY21 FY22 FY23 FY24
Revenue: EBNPP 15,945 17,105 16,574 17,376 18,181
Revenue: consensus 15,945 16,396 17,501 18,223 19,161
EBNPP vs. consensus 0% 4% -5% -5% -5%

EBNPP vs. consensus 0% 4% -3% -2% 1%
For DHL Express, our revenue forecasts are in-line with consensus throughout the
forecast period. For FY21 our EBIT estimate is 6% below, however we have tried to err
on the side of caution in this respect.
Figure 108: DHL Express: EBNPP vs. consensus

DHL Express (EURm) FY20 FY21 FY22 FY23 FY24
Revenue: EBNPP 19,135 20,472 21,750 23,062 24,403
EBNPP vs. consensus 0% -1% 0% 1% 1%

As shown previously in the US Domestic section of this report, our EBIT forecasts for
FedEx Express (for which revenues are split between US Domestic and International)
are slightly ahead for FY22 (i.e. June 2021-May 2022) but then progressively diverge,
to the point where we are 13% below consensus for FY24.
Figure 109: FedEx Express division: EBNPP vs. consensus

FedEx Express (USDm) FY20 FY21 FY22 FY23 FY24
Revenue: EBNPP 35,513 41,662 42,664 43,952 45,279
EBNPP vs. consensus 0% 0% -1% -2% 0%

EBNPP vs. consensus 4% 4% 2% -10% -13%

Valuation

FedEx appears best value on consensus P/E...
Based on consensus 12-month forward P/E, FedEx is the cheapest stock in the space,
trading on 14.6x versus Deutsche Post and UPS on 16.0x and 18.9x respectively.
This is also true for current trading relative to history. As shown below, FedEx currently
trades broadly in-line with its average 12m-forward P/E seen since 2010.
Figure 110: FedEx 12-month forward consensus P/E, inc. average and current
levels, since January 2010
20.0
18.0
16.0
P/E, 12m-forward
FedEx
14.0
Average
12.0 Current
10.0
8.0
6.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
For Deutsche Post and FedEx the opposite is true, with both stocks trading towards the
upper end of their historic trading ranges.
As shown below, over the past decade Deutsche Post has rarely traded above its
current 12m-forward P/E of 16.0x.
Figure 111: Deutsche Post 12-month forward consensus P/E, inc. average and
current levels, since January 2010
20.0
18.0
16.0
P/E, 12m-forward
DPW
14.0
Average
12.0 Current
10.0
8.0
6.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

Currently trading on 18.9x 12m-forward P/E, UPS currently trades towards the top end
of its historic range. However this is not a record high, with the stock trading at a
premium to this level during H1 2010 and H2 2020.
Figure 112: UPS 12-month forward consensus P/E, inc. average and current
levels, since January 2010
24.0
22.0
20.0
P/E, 12m-forward
UPS
18.0
Average
16.0 Current
14.0
12.0
10.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
As shown below, however, both H1 2010 and (most notably) H2 2020 coincided with
periods of rapid consensus upgrades. In other words, buy-side estimates during these
periods were no doubt well ahead of consensus sell-side forecasts.
Given that we do not envisage large consensus upgrades during the year ahead –
indeed our analysis suggests risk may be skewed to the downside – we think it is fair to
say that UPS is currently trading around a peak multiple in these circumstances.
Figure 113: UPS 12-month forward consensus EPS (US Dollars), since January
2010
10.0
9.0
8.0
7.0
EPS, 12m-forward
6.0
UPS
5.0
The spike in UPS' Current
4.0 P/E seen in H2 2020
coincided with a
3.0 period of rapid
consensus
2.0 upgrades
1.0
0.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

...but EV/EBIT provides a cleaner metric given differing balance sheet
strengths
In our experience the Street tends to focus on P/E multiples to a greater extent than
any other metric when assessing Logistics stocks. As such while the preceding
analysis is simplistic, we would be cautious in terms of downplaying its importance.
Nonetheless we consider EV/EBIT to be a cleaner metric for comparing between
stocks given differences in balance sheet strength.
As shown below, when capitalised leases and pension liabilities are included (and one
also calculates EBITDA consistently with respect to lease depreciation), FedEx and
UPS have higher net debt-to-EBITDA ratios than Deutsche Post.
Figure 114: Like-for-like net debt-to-EBITDA for Deutsche Post, FedEx and UPS,
end-2020. Deutsche Post EBITDA adjusted to exclude lease depreciation
3.7 3.7
3.6
3.5
3.4
Net debt-to-EBITDA
3.3
3.3
3.2
3.1
3.1
3.0
2.9
2.8
2.7
FedEx UPS Deutsche Post
Source: Exane BNP Paribas estimates based on company data. *Based on end-FY21 estimate for FedEx
An overview of net debt composition is provided below. While FedEx is well known for
its widespread use of leased assets, leases now actually form a larger share of net
debt for Deutsche Post (though this primarily reflects Deutsche Post’s relatively low net
financial debt).
Figure 115: Composition of net debt (including pensions and leases) for
Deutsche Post, FedEx and UPS, end-2020
100%
7%
80% 36%
50%
42%
60%
15% Leases
Pensions
40% Net (debt)/cash
28%
50% 51%
20%
21%
0%
Deutsche Post FedEx UPS
Source: Exane BNP Paribas estimates based on company data. *Based on end-FY21 estimate for FedEx

The Street often focuses on headline numbers given ease of
availability…
Given the simplicity of pulling numbers quickly from feeds such as Datastream, we find
that headline EV/EBIT multiples do matter to some extent in terms of how the Street
assesses valuation.
On this basis Deutsche Post trades on the lowest EV/EBIT based on 12m-forward
consensus, at 12.4x, while UPS trades on the highest multiple at 17.2x. FedEx trades
in the middle on a headline 13.6x.
Overviews showing how these multiples relate to the historic data series are provided
below. Similar to the P/E analysis shown above, Deutsche Post and UPS trade closest
to the top of the historic range, while FedEx trades closest to its historic (post-2010)
average.
Figure 116: Deutsche Post trades on the lowest EV/EBIT based on 12m-forward consensus, and UPS the
highest
Comparison of Deutsche Post, FedEx and UPS headline Deutsche Post 12-month forward EV/EBIT, including average
EV/EBIT multiples, based on 12-month forward consensus and current level, since January 2010
18.0 17.2 24.0
16.0 22.0
13.6 20.0
14.0
EV/EBIT, 12m-forward
12.4 18.0
12.0 16.0
10.0 14.0
8.0 12.0
10.0
6.0
8.0
4.0
6.0
2.0 4.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
0.0
UPS FedEx DPW
DPW Average Current
FedEx 12-month forward EV/EBIT, including average and UPS 12-month forward EV/EBIT, including average and
current level, since January 2010 current level, since January 2010
24.0 24.0
22.0 22.0
20.0 20.0
18.0 18.0
16.0 16.0
14.0 14.0
12.0 12.0
10.0 10.0
8.0 8.0
6.0 6.0
4.0 4.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
FedEx Average Current UPS Average Current
Source: Datastream, Exane BNP Paribas

The problem with such headline multiples is that liabilities such as pensions and
capitalised leased are not included in EV, depressing the multiples of companies that
have these liabilities – something that is true for each of the three integrators.
We provide a summary below that compares the headline 12-month forward EV/EBIT
multiples of Deutsche Post/FedEx/UPS (taken from Datastream) with those that we
adjusted to include pensions and leases.
The analysis does not change the conclusion that Deutsche Post is the cheapest of the
three stocks and UPS the most expensive, but does narrow the delta (the differential
between the headline numbers equate to a premium of 38% versus Deutsche Post for
UPS, whereas the corresponding delta is 26% on a pension/lease-adjusted basis).
Figure 117: Comparison of Deutsche Post, FedEx and UPS headline and
pension/lease-adjusted EV/EBIT multiples, based on 12-month forward
consensus EBIT
25.0
20.0 19.1
17.2
16.2
15.1
15.0 13.6
12.4 Headline
Pension/lease-adjusted
10.0
5.0
0.0
UPS FedEx DPW
Based on our own estimates, we estimate cal. 2021 EV/EBIT multiples of 13.4x for
Deutsche Post, 15.1x for FedEx and 18.3x for UPS.
Figure 118: EV/EBIT for Deutsche Post, FedEx and UPS, cal. 2021E
20.0
18.3
18.0
16.0 15.1
14.0 13.4
12.0
EV-to-EBIT
10.0
8.0
6.0
4.0
2.0
0.0
UPS FedEx Deutsche Post
Source: Exane BNP Paribas estimates based on company data. *Based on FY22 estimates for FedEx

Our analysis of Deutsche Post’s business units that most closely
resemble UPS and FedEx have an implied EV/EBIT of <10x
Given that the Deutsche Post group includes a broader range of business activities
than that of UPS and FedEx, it is useful to compare its (headline) EV/EBIT with that of
a divisional peer weighted-average. Specifically, we use UPS to benchmark DHL
Express, Austrian Post for P&P and eCommerce, and 75% of the average multiple of
DSV and Kuehne + Nagel for DHL Forwarding and Supply Chain.
Deutsche Post has historically traded at a discount to this peer weighted average, and
this remains the case as shown below. At present, the estimated discount of -19%
ranks towards the high end of the historic range – supportive of our Outperform rating.
Figure 119: Based on a peer-weighted EV/EBIT, DPW trades close to the largest discount seen since 2013
Deutsche Post 12-month forward EV/EBIT (‘actual’) vs. Peer Difference between Deutsche Post 12-month forward EV/EBIT
weighted average (‘weighted’) and Peer weighted average
20.0 10%
18.0 5%
16.0 0%
EV/EBIT (12-month forward)
14.0
Actual vs. weighted
-5%
12.0
-10%
10.0
-15%
8.0
-20%
6.0
-25%
4.0
2.0 -30%
0.0 -35%
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21
Weighted Actual Difference Average Current
If we back out the valuation of the businesses that are most similar to UPS and FedEx
– DHL Express and DHL eCommerce – we find that the EV/EBIT of these businesses
implied by current valuation is just 9.7x, in-line with the historic average despite the
strong recent performance of the Deutsche Post share price.
Figure 120: DHL Express and eCommerce implied EV/EBIT (12m-forward) based
on peer comps
25.0
20.0
EV/EBIT (implied)
15.0
EV/EBIT (implied)
Average
10.0
Current
5.0
0.0
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jan-20
Jan-21

DHL Express produces higher returns than UPS/FedEx on a headline
basis…
Given that ROIC is one of the key drivers of a justified EV/EBIT multiple, one may
assume that DHL Express produces lower returns than its US counterparts. Yet this is
not the case. As shown below, during 2020 we estimate DHL Express produced a post-
tax ROIC of 17.5%, materially higher than UPS’ 15.5% and almost double the 9.0%
achieved by FedEx.
Figure 121: ROIC (post-tax) % of DHL Express, FedEx and UPS, 2020
20.0%
17.5%
18.0%
15.5%
16.0%
14.0%
ROIC % (post-tax)
12.0%
10.0% 9.0%
8.0%
6.0%
4.0%
2.0%
0.0%
DHL Express UPS FedEx
Source: Exane BNP Paribas estimates based on company data. *FY21 estimate used for FedEx
…even though this is depressed significantly by goodwill…

DHL Express’ outperformance in this respect is particularly impressive given that
goodwill accounts for a significantly higher share of its invested capital than is the case
for either UPS or FedEx. While DHL’ Express’ share of goodwill has declined in recent
years, as of 2020 it still accounted for 39% of its invested capital.
Figure 122: The share of goodwill on DHL Express’ balance sheet is significantly higher than that of FedEx
and UPS
Invested capital split between goodwill and other IC; DHL DHL Express invested capital (excluding IFRS 16 right-of-use
Express, FedEx and UPS, 2020 assets), split out by Goodwill and Other, 2007 to 2020
100% 12.0
10.0
80%
61% 8.0
EUR billion
6.1
6.1
60% 84%
% of Total
4.8
91% Other IC 6.0

3.7
3.3
2.9
3.2
2.6
2.5
2.8
2.7
2.3
2.2
2.3
Goodwill
40%
4.0
4.2
4.2
4.1
4.1
4.1
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
20% 39% 2.0
16%
9% 0.0
0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
DHL Express FedEx UPS
Goodwill Other IC
Source: Company data, Exane BNP Paribas estimates. *Estimate for end-FY21 used for FedEx

…all of which is almost two decades old
The acquisitions that contributed to the goodwill on DHL Express’ balance sheet were
all undertaken in the early-2000s, between 2001 and 2003.
While we are well aware that goodwill is there for a reason, when thinking about future
incremental returns – which is ultimately the more important driver of shareholder
returns – excluding goodwill in DHL Express’ case is reasonable.
Figure 123: Composition of DHL Express goodwill by acquisition, since 1998

(EUR billion)
4.3
4.2
4.2
4.1
4.1
4.1
4.5
4.0
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.9
3.8
3.7
4.0
3.5
Other
3.0
Securicor Omega (2003)
2.3
EUR billion
2.5 Narrondo Desarrollo (2003)

2.0 Airborne (2003)
1.5 DHL International (2002)

0.6
1.0 DHL International (2001)
0.5
0.0
0.0
0.0
0.0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
As shown below, if one does exclude goodwill from DHL Express’ invested capital
base, post-tax ROIC is particularly impressive, being above 30% for seven of the past
eight years.
Figure 124: DHL Express ROIC (post-tax), adjusted and unadjusted for historic
goodwill, 2008 to 2020
DHL Express ROIC
40% declined significantly
during 2018-2019 due to
35% Boeing-777 capex, but
rebounded well in 2020
30%
25%
ROIC %
ROIC (post-tax) %,
20% ex-goodwill/IFRS 16
15% ROIC (post-tax) %
10%
5%
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

Our analysis shows that the incremental returns produced by DHL Express over the
past decade have been excellent, with a cumulative (post-tax) return during 2011-2020
of 14.9%.
This would have been higher had it not been for the large investment in Boeing-777
Freighters (of EUR2bn) made by DHL Express over the past decade, which was the
main reason why incremental ROIC dipped during 2019 in particular.
Figure 125: DHL Express’ cumulative incremental ROIC was almost 15% over the past decade
DHL Express incremental post-tax ROIC (ex-goodwill), 2011 DHL Express cumulative incremental post-tax ROIC (ex-
to 2020 goodwill), 2011 to 2020
27.8%
27.3%
30% 25%
Incremental ROIC (ex-goodwill/IFRS 16),

Incremental ROIC (ex-goodwill/IFRS 16)
18.6%
21.8%
21.7%
17.9%
17.8%
17.2%
17.1%
17.0%
25%
20%
15.5%
15.2%
14.9%
17.8%
16.1%
20%
12.4%
14.5%
cumulative
15%
11.9%
15%
9.9%
10%
10%
2.6%
5%
5%
0% 0%
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
The good news in this respect is that DHL Express’ balance between owned and
leased aircraft appears much more balanced following the recent B777F capex surge,
with the gap versus UPS closing significantly in terms of aircraft asset intensity.
With B777F investments set to be primarily lease-financed going forward, this recent
dilutive effect for ROIC should be less of an issue during the coming years.
Figure 126: Aircraft (owned and finance-leased) as % of total assets (ex-

goodwill/IFRS 16); DHL Express vs. UPS, 2008 to 2020
60% DHL Express has

recently closed the gap
49% on UPS in terms of
50% 46% 46% 47% 45% aircraft asset intensity
45% 45%
43%
Aircraft as % of Total assets
41%
39% 38%
40% 37% 37%
29%
30% 27% DHL Express
21% 21% 20% 22% 23% UPS
19% 20%
20% 16%
14%
9% 11%
10%
0%
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020

From a tactical perspective, recent ISM strength supports our cautious
positioning on UPS/FDX
As we have outlined in previous reports including FREIGHT FORECASTER
and TRADING TRANSPORT, PMI/ISM survey data should not be ignored when
assessing the outlook for the multiples on which the Freight Transport stocks trade.
In the US, we have no crystal ball to forecast the trajectory of the ISM survey over the
coming months. Nonetheless with the ISM having hit a 37-year high of 64.7 last week,
one would presume risk lies to the downside on a 12-month view.
As shown below, the correlation between the aggregate 12-month forward P/E on
which UPS/FDX trade and the ISM survey is strongly positive. We find that lagging the
ISM survey by 3 months provides the strongest correlation.
Figure 127: Aggregate 12m-forward P/E of UPS/FedEx vs. ISM inc. 3-month lag
22.0 70
20.0
65
P/E (12m-forward)
ISM, 3-month lag

18.0
60
P/E
16.0
ISM -3
55
14.0
50
12.0
10.0 45
Jan-2010
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021
We note the year-on-year change of UPS/FDX’s 12-month forward P/E also exhibits a
strong correlation with the year-on-year change in the ISM survey, and that the YoY
change in the ISM currently stands towards the upper end of the historic range.
Figure 128: YoY change in aggregate 12m-forward P/E of UPS/FedEx vs. YoY
change in ISM inc. 3-month lag
10.0 20
8.0
15
6.0
10
P/E (12m-forward)
4.0
2.0 5 P/E
ISM
0.0 0 ISM
-2.0
-5
-4.0
-10
-6.0
-8.0 -15
Jan-2011
Jan-2012
Jan-2013
Jan-2014
Jan-2015
Jan-2016
Jan-2017
Jan-2018
Jan-2019
Jan-2020
Jan-2021

Our EPS forecasts are below-consensus for UPS/FedEx and in-line for
Deutsche Post…
An overview of our forecasts versus consensus is provided below. At the net income
level the main differences versus consensus are for UPS and FedEx for 2022E and
2023E. For 2022E we stand -15% and -6% for UPS and FedEx respectively, while the
corresponding deltas for 2023E are -19% and -11%.
Figure 129: Overview of EBNPP forecasts vs. consensus

EBIT Net income DPS
2021E 2022E 2023E 2021E 2022E 2023E 2021E 2022E 2023E
EBNPP 5,833 6,151 6,481 3,580 3,751 3,946 1.40 1.50 1.60
Consensus 5,721 6,001 6,436 3,570 3,818 4,083 1.45 1.55 1.65
Deutsche Post 2% 2% 1% 0% -2% -3% -3% -3% -3%
EBNPP 6,621 7,047 7,399 4,615 4,950 5,225 3.00 3.00 3.00
Consensus 5,995 6,918 7,720 4,803 5,254 5,862 2.60 2.79 3.00
FedEx 10% 2% -4% -4% -6% -11% 15% 8% 0%
EBNPP 9,787 9,836 9,860 7,143 7,181 7,242 4.09 4.11 4.15
Consensus 9,624 10,300 10,809 7,861 8,448 8,953 4.23 4.44 4.66
UPS 2% -5% -9% -9% -15% -19% -3% -7% -11%
Source: Datastream, Exane BNP Paribas estimates, Note: for FedEx 2021E corresponds to FY22E, etc.
…with our Target Prices derived from P/E multiples

We derive our Target Prices by applying P/E multiples to our 2022 EPS forecasts.
For Deutsche Post we use 17x, which is towards the high end of the historic range,
however we do believe that the Street is starting to better appreciate the quality of
DPW’s business mix (suggesting the stock should continue to re-rate upwards).
In the case of FedEx we use a target P/E of 16x, which is towards the upper end of the
13-17x range on which the stock tends to trade.
For UPS we use a target P/E of 18x (on company defined EPS), which is slightly above
the ~17x average on which the stock has traded over the past decade. We note that
UPS’ 12m-forward consensus P/E rarely rises to a level above 19x.

Company
Section

TRANSPORT &
INFRASTRUCTURE
OUTPERFORM TARGET PRICE EPS 21e EPS 22e

DEUTSCHE POST DHL TARGET PRICE EUR52 (UPSIDE 10%)  27%  14%  16%
Lowest risk, lowest price

Reiterate Outperform: Target Price raised from EUR41 to EUR52
Price (06 April 2021) EUR47.2
Market cap (EURbn) 57.2
Deutsche Post provides our preferred exposure among the three global integrators – primarily due
Free float (EURbn) 44.9 to jewel-in-the-crown DHL Express, which we expect to go from strength to. Our analysis suggests
EV (EURbn) 78.0
DHL Express has; (i) better exposure than the US-centric parcel operations of UPS and FedEx
from both a volume outlook and competition perspective; and (ii) a lower implied valuation. Our
Robert Joynson, CFA Outperform rating is reiterated, with our Target Price raised from EUR41 to EUR52.
(+44) 207 039 9515
[email protected] DHL’s competitive positioning is strong, helped by its lack of US Domestic exposure
Following its withdrawal from the US domestic market in the late-2000s, DHL Express’ exposure is
almost entirely cross-border, where competitive pressures are low due to the DHL-FDX-UPS
oligopoly. Amazon is not active in this market, nor do we think it ever will be. DHL Express has
been taking share in the TDI market for years, primarily at the expense of FedEx, which we do not
expect to change given DHL Express’ greater exposure to B2C.
Consensus expectations appear reasonable

Consensus forecasts that EBIT will rise to EUR6.5bn by 2023, consistent with company guidance
of EUR>6.0bn. We are comfortable in this respect, with our own forecasts in-line. For 2021 we are
similarly relaxed, with our EBIT forecast of EUR5.8bn in-line with guidance of EUR>5.6bn.
Valuation: Deutsche Post provides the sector’s lowest risk at the lowest price
Deutsche Post trades on 16.4x 2021E P/E, significantly below UPS on 22.4x and slightly below
FedEx on 16.8x, on our estimates. Yet this fails to adjust for the different business mix, with DHL
Express specifically valued at just 9.7x 2021 EV/EBIT on our estimates, compared with UPS on
17.2x and FedEx on 13.6x on consensus forecasts. Following the 39% spike in the DPW share
price since Jan-2020, which has left it trading on a P/E towards the upper end of its historic range,
we would certainly not argue that now is the best-ever entry point. But on a relative basis versus its
US peers, Deutsche Post is certainly our preferred play.
Financials 12/20 12/21e 12/22e 12/23e Valuation metrics(2) 12/20 12/21e 12/22e 12/23e
EPS, Adjusted (EUR) 2.38 2.88 3.07 3.28 P/E (x) 14.1 16.4 15.4 14.4
EPS - Refinitiv (EUR) 2.36 2.85 3.05 3.31 Net yield (%) 4.0 3.0 3.2 3.4
Net dividend (EUR) 1.35 1.40 1.50 1.60 FCF yield (%) 5.6 2.4 2.8 3.8
EV/Sales (x) 0.9 1.1 1.0 1.0
Sales (EURm) 66,806 73,529 75,979 76,290 EV/EBITDA (x) 7.0 8.2 7.7 7.2
EBITA, Adj. (EURm) 4,916 5,833 6,151 6,481 EV/EBITA (x) 12.4 13.4 12.7 12.0
Net profit, Adj.(EURm) 3,014 3,580 3,751 3,946 EV/CE (x) 1.5 1.9 1.7 1.7
ROCE (%) 9.8 10.1 9.8 10.5
Net Debt/EBITDA, Adj. (x) 1.7 1.7 1.7 1.7
Performance(1) 1w 1m 3m 12m
Absolute (%) 1 16 18 86
Rel. Transport & 0 4 2 5
Rel. MSCI Europe (%) 0 9 9 36
Source: Exane BNPP (estimates), Refinitiv (consensus) (1) In listing currency, with dividend reinvested (2) Yearly average price for FY ended 12/20

DEUTSCHE POST DHL (Outperform) Price at 6 Apr. 21 / Target Price
Logistics | Transport & Infrastructure - Germany EUR47.2 / EUR52 +10%
Company description Peer group YTD performance

Deutsche Post DHL is a global logistics provider w ith roots as Germany's national Price YTD perform ance in EUR (%)
Stock
postal carrier. Through acquisitions, Deutsche Post extended its service portfolio to (06 Apr. 21) Abs. Rel. Sector
include the global DHL Express franchise as w ell as a position in the freight
American (=) USD 24.1 58.5 38
forw arding and contract logistics sub-sectors. They are the market leader in parcel
JetBlue Airw ays (-) USD 21.3 51.8 33
delivery in Germany and are one of the top 3 players in the global express market
competing w ith the likes of FedEx and UPS. United Airlines (-) USD 59.5 42.9 25
Southw est (+) USD 64.1 42.9 25
IAG (+) p 215 41.5 24
Delta Air Lines (+) USD 51.7 33.4 16
Kuehne + Nagel (-) CHF 274.3 33.3 16
easyJet (+) p 1,012 28.4 12

Management DSV (-) DKK 1,252 23.1 7
Nikolaus von Bomhard, Chairman Wizz Air (-) p 5,090 17.5 3
Frank Appel, CEO Deutsche Post (+) EUR 47.2 16.4 2
Melanie Kreis, CFO FedEx (=) USD 282.2 13.1 (1)
Martin Ziegenbalg, Investor Relations AP Moller (=) DKK 14,775 10.6 (3)
Fraport (-) EUR 54.3 9.9 (4)
Eiffage (+) EUR 86.8 9.8 (4)
Vinci (+) EUR 89.3 9.8 (4)

Ownership structure UPS (-) USD 173.0 7.2 (6)
KfW Bankengruppe 20.5% Atlantia (=) EUR 15.7 6.8 (7)
Other Shareholders 70.5% Ryanair (+) EUR 17.0 4.3 (9)
ACS (+) EUR 27.9 4.2 (9)
Lufthansa (-) EUR 11.2 3.7 (9)
Air France-KLM (=) EUR 5.2 2.0 (11)

2020 Sales by region Groupe ADP (-) EUR 105.9 (0.2) (13)
Aena SA (-) EUR 139.1 (2.2) (15)
Ferrovial (-) EUR 22.1 (2.3) (15)
InPost SA (=) EUR 15.2 (5.0) (17)

4%
Getlink (-) EUR 13.2 (6.9) (19)
18% 30% Germany

30%
28% Europe (ex Germany)
19% Americas
Sector calendar
08 Apr. 21 Vinci: AGM (10:00 CET)
18% Asia Pacific
19% Ferrovial: AGM (12:30 CET)
4% RoW 09 Apr. 21 Getlink: Mar Traffic figures 2021 (08:00 CET)
28%
Ferrovial: AGM (12:30 CET)
12 Apr. 21 Ferrovial: Mar Traffic figures 2021 (08:00 CET)
14 Apr. 21 Zurich Airport : Mar Traffic figures 2021 (17:40 CET)
Vinci: Q1 Traffic figures 2021 (17:45 CET)
15 Apr. 21 Fraport: Mar Traffic figures 2021 (07:00 CET)
Groupe ADP: Mar Traffic figures 2021 (17:45 CET)
2020 Sales by activity 16 Apr. 21 Kansas City Sou: Q1 Earnings 2021 (12:00 CET)
19 Apr. 21 United Airlines: Q1 Earnings 2021 (22:00 CET)
20 Apr. 21 CSX Corp: Q1 Earnings 2021 (22:00 CET)
21 Apr. 21 Eiffage: AGM
7%
22 Apr. 21 DP World: Q1 Results 2021
28% Express Zurich Airport : AGM
28%
19% Norw egian Air S: Q1 Results 2021 (07:00 CET)
24% Post & Parcel Germany
Getlink: Q1 Revenues 2021 (08:00 CET)
22% Global forwarding/freight Southw est: Q1 Earnings 2021 (12:00 CET)
Union Pacific C: Q1 Earnings 2021 (14:00 CET)
19% Supply chain
J.B. Hunt Trans: AGM (17:00 CET)
22% 7% eCommerce Solutions Vinci: Q1 Revenues 2021 (17:45 CET)
24%
26 Apr. 21 Zurich Airport : Ex & Div. Payment (0CHF)
Kuehne + Nagel: Q1 Results 2021 (06:45 CET)
27 Apr. 21 RAI Way: AGM
DSV: Q1 Results 2021 (07:30 CET)
Aena SA: AGM (12:00 CET)
UPS: Q1 Earnings 2021 (12:00 CET)
Analyst 28 Apr. 21 Aena SA: Q1 Results 2021
Robert Joynson, CFA (+44) 207 039 9515 Getlink: AGM
[email protected] Groupe ADP: Q1 Revenues 2021 (07:30 CET)

Price at 06 Apr. 21 / 12m Target Price
EUR47.2 / EUR52 +10% DEUTSCHE POST DHL (Outperform)
Refinitiv / Bloomberg: DPWGn.DE / DPW GY Analyst: Robert Joynson, CFA (+44) 207 039 9515 Logistics | Transport & Infrastructure - Germany
Com pany Highlights EURm
60.0
Enterprise value 77,976
Market capitalisation 57,227 Target Price
50.0
Free float 44,894
3m average volume 130 40.0
Perform ance (*) 1m 3m 12m
Absolute 16% 18% 86% 30.0
Rel. Sector 4% 2% 5%
Rel. MSCI Europe 9% 9% 36%
12m Hi/Lo (EUR) : 47.2 +0% / 25.3 +86%
20.0
CAGR 2006/2021 2021/2025
EPS restated 4% 6% 15.7
CFPS 6% 5% Price 10.4*CFPS Relative to MS CI Europ e
Price (yearly avg from Dec. 12 to Dec. 20) 14.4 20.7 25.8 27.3 26.2 34.4 32.3 29.4 33.7 47.2 47.2 47.2 47.2 47.2
PER SHARE DATA (EUR) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
No of shares year end, basic, (m) 1 210.998 1 208.910 1 209.508 1 210.620 1 203.093 1 210.098 1 230.119 1 234.110 1 236.900 1 213.586 1 192.694 1 172.796 1 172.796 1 172.796
Avg no of shares, diluted, excl. treasury stocks (m) 1 210.998 1 261.854 1 262.751 1 262.521 1 257.325 1 260.834 1 251.910 1 256.972 1 265.492 1 242.178 1 221.285 1 201.388 1 201.388 1 201.388
EPS reported, Gaap 1.37 1.73 1.71 1.27 2.19 2.24 1.69 2.13 2.41 2.93 3.13 3.35 3.55 3.74
EPS company definition
EPS restated, fully diluted 1.39 1.66 1.74 1.49 2.13 2.16 1.66 2.13 2.38 2.88 3.07 3.28 3.46 3.65
% change 38.8% 19.4% 4.6% (14.4%) 42.9% 1.4% (22.9%) 27.8% 12.0% 21.0% 6.6% 6.9% 5.4% 5.5%
Book value (BVPS) (a) 9.9 8.2 7.8 9.1 9.2 10.4 11.0 11.4 11.1 12.1 13.1 14.3 16.2 18.3
Net dividend 0.70 0.80 0.85 1.05 1.05 1.15 1.15 1.15 1.35 1.40 1.50 1.60 1.70 1.80
STOCKMARKET RATIOS Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
P / E (P/ EPS restated) 10.4x 12.5x 14.8x 18.4x 12.3x 16.0x 19.4x 13.8x 14.1x 16.4x 15.4x 14.4x 13.6x 12.9x
P / E relative to MSCI Europe 76% 74% 84% 120% 69% 102% 129% 101% 61% 93% 99% 102% 106%
FCF yield (11.8%) 5.8% 3.6% 3.9% 1.2% 2.3% 2.3% 0.0% 5.6% 2.4% 2.8% 3.8% 3.8% 4.1%
P / BVPS 1.46x 2.54x 3.33x 3.00x 2.84x 3.30x 2.93x 2.57x 3.03x 3.91x 3.60x 3.30x 2.91x 2.58x
Net yield 4.8% 3.9% 3.3% 3.8% 4.0% 3.3% 3.6% 3.9% 4.0% 3.0% 3.2% 3.4% 3.6% 3.8%
Payout 50.2% 48.1% 48.9% 70.5% 49.4% 53.4% 69.1% 54.1% 56.7% 48.6% 48.8% 48.7% 49.1% 49.3%
EV / Sales 0.38x 0.58x 0.71x 0.68x 0.69x 0.80x 0.92x 0.86x 0.92x 1.06x 1.03x 1.02x 0.98x 0.94x
EV / Restated EBITDA (**) 5.3x 7.7x 9.3x 9.9x 8.1x 9.3x 8.7x 7.0x 7.0x 8.2x 7.7x 7.2x 6.8x 6.4x
EV / Restated EBITA 7.9x 11.3x 13.0x 14.7x 11.2x 12.9x 17.8x 13.0x 12.4x 13.4x 12.7x 12.0x 11.3x 10.7x
EV / NOPAT 9.2x 13.1x 15.2x 17.1x 13.1x 15.1x 20.2x 16.4x 15.7x 18.6x 17.6x 16.7x 15.7x 14.9x
EV / OpFCF NS 14.9x 21.9x 21.0x 39.7x 28.2x 15.2x 16.6x 11.1x 15.5x 13.7x 11.9x 11.2x 10.4x
EV / Capital employed (incl. gross goodw ill) 0.9x 1.4x 1.7x 1.6x 1.6x 1.9x 1.6x 1.4x 1.5x 1.9x 1.7x 1.7x 1.8x 1.8x
ENTERPRISE VALUE (EURm ) 21,264 32,210 40,171 40,318 39,491 48,362 56,433 54,360 61,131 77,976 78,049 77,768 77,459 77,094
Market cap 17,461 25,117 31,211 33,103 31,703 42,133 39,883 36,318 41,630 57,227 56,241 55,303 55,303 55,303
+ Adjusted net debt (A) 2,490 2,597 2,266 1,644 3,002 2,989 3,841 4,119 4,465 5,824 6,995 7,765 7,572 7,325
+ Adjusted lease liability (B) 0 0 0 0 0 0 9,678 10,120 10,278 10,278 10,278 10,278 10,278 10,278
+ Other liabilities and commitments 1,908 4,897 7,138 6,070 5,437 4,297 4,088 4,860 5,815 5,705 5,592 5,479 5,363 5,246
+ Revalued minority interests 311 487 679 783 783 783 783 783 783 783 783 783 783 783
- Revalued investments 907 887 1,123 1,282 1,434 1,840 1,840 1,840 1,840 1,840 1,840 1,840 1,840 1,840
P & L HIGHLIGHTS (EURm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
Sales 55,512 55,085 56,630 59,230 57,334 60,444 61,550 63,341 66,806 73,529 75,979 76,290 79,263 82,252
Restated EBITDA (b) (**) 4,004 4,203 4,341 4,074 4,864 5,210 6,456 7,820 8,711 9,494 10,163 10,784 11,395 11,999
Depreciation (1,311) (1,340) (1,261) (1,329) (1,346) (1,469) (3,289) (3,640) (3,795) (3,661) (4,012) (4,302) (4,560) (4,803)
Restated EBITA (b) 2,693 2,863 3,080 2,744 3,518 3,741 3,167 4,180 4,916 5,833 6,151 6,481 6,836 7,196
Reported operating profit (loss) 2,665 2,862 2,960 2,409 3,487 3,739 3,164 4,136 4,881 5,833 6,151 6,481 6,836 7,196
Net f inancial income (charges) (429) (291) (388) (354) (359) (411) (576) (654) (676) (579) (652) (703) (751) (784)
Aff iliates 2 2 5 2 4 2 (2) (8) (34) 1 1 1 1 1
Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Tax (458) (361) (400) (338) (351) (477) (362) (698) (995) (1,471) (1,540) (1,618) (1,704) (1,796)
Minorities (122) (120) (106) (179) (142) (140) (149) (153) (197) (203) (209) (215) (222) (228)
Net attributable profit reported 1,658 2,091 2,071 1,540 2,639 2,713 2,075 2,623 2,979 3,580 3,751 3,946 4,160 4,389
Net attributable profit restated (c) 1,686 2,092 2,191 1,875 2,670 2,715 2,078 2,667 3,014 3,580 3,751 3,946 4,160 4,389
CASH FLOW HIGHLIGHTS (EURm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e De c. 24e Dec. 25e
EBITDA (reported) (**) 4,004 4,203 4,341 4,074 4,864 5,210 6,456 7,820 8,711 9,494 10,163 10,784 11,395 11,999
EBITDA adjustm ent (b) 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other items (3,258) (563) (733) (834) (1,828) (1,169) 200 (935) 144 (471) (534) (489) (488) (502)
Change in WCR (422) (84) (21) 788 (75) (121) (283) 4 (404) 79 (99) 68 (87) (84)
Operating cash flow 324 3,556 3,587 4,028 2,961 3,920 6,373 6,889 8,451 9,102 9,531 10,362 10,820 11,412
Capex (1,639) (1,389) (1,750) (2,104) (1,966) (2,203) (2,649) (3,612) (2,922) (4,072) (3,845) (3,811) (3,931) (4,030)
Operating free cash flow (OpFCF) (1,315) 2,167 1,837 1,924 995 1,717 3,724 3,277 5,529 5,030 5,685 6,551 6,890 7,382
Repayment of lease liability (1,722) (1,894) (1,894) (1,741) (2,029) (2,260) (2,461) (2,649)
Net f inancial items + tax paid (777) (685) (690) (613) (610) (731) (1,051) (1,366) (1,241) (1,896) (2,039) (2,178) (2,314) (2,443)
Free cash flow (2,092) 1,482 1,147 1,312 385 986 951 17 2,394 1,393 1,618 2,113 2,115 2,291
Net f inancial investments & acquisitions 207 172 198 413 59 446 91 818 114 137 132 130 133 132
Other 4,232 (787) 67 82 189 119 (9,995) 67 (1,388) 0 0 0 0 0
Capital increase (decrease) 48 (19) (23) (31) (836) (148) (44) 0 (45) (1,050) (1,050) (1,050) 0 0
Dividends paid (924) (955) (1,058) (1,154) (1,155) (1,390) (1,533) (1,569) (1,579) (1,863) (1,900) (1,996) (2,090) (2,213)
Increase (decrease) in net financial debt (1,471) 107 (331) (622) 1,358 (13) 10,530 667 504 1,383 1,200 803 (158) (209)
Cash flow , group share (29) 2,794 2,783 2,399 2,303 3,148 3,623 3,428 5,369 5,097 5,268 5,553 5,822 6,088
BALANCE SHEET HIGHLIGHTS (EURm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
Net operating assets 18,814 18,650 19,529 20,285 20,943 20,574 31,052 33,290 33,665 35,854 39,325 38,703 37,941 37,036
WCR 3,489 3,314 3,654 3,088 3,238 3,390 3,846 4,325 4,939 4,860 4,959 4,890 4,977 5,062
Restated capital em ployed, incl. gross goodw ill 23,440 23,061 24,321 24,532 25,077 25,034 35,935 38,677 39,646 41,756 45,325 44,636 43,960 43,140
Shareholders' funds, group share 11,951 9,857 9,376 11,034 11,087 12,637 13,590 14,117 13,777 14,640 15,641 16,748 19,032 21,427
Minorities 213 191 204 261 263 266 283 275 301 309 317 325 334 343
Provisions/ Other liabilities 11,120 13,098 15,307 14,326 13,732 12,376 12,485 13,564 14,815 14,672 16,033 13,426 10,618 7,604
Net f inancial debt (cash) 2,416 2,523 2,192 1,570 2,928 2,915 3,767 3,992 4,338 5,721 6,921 7,724 7,566 7,356
Lease liability 9,678 10,120 10,278 10,278 10,278 10,278 10,278 10,278
FINANCIAL RATIOS (%) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 ¹ Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
Sales (% change) 5.1% (0.8%) 2.8% 4.6% (3.2%) 5.4% 1.8% 2.9% 5.5% 10.1% 3.3% 0.4% 3.9% 3.8%
Organic sales grow th 5.1% (0.8%) 2.8% 4.6% (3.2%) 5.4% 1.8% 2.9% 5.5% 10.1% 3.3% 0.4% 3.9% 3.8%
Restated EBITA (% change) 8.3% 6.3% 7.6% (10.9%) 28.2% 6.3% (15.3%) 32.0% 17.6% 18.7% 5.4% 5.4% 5.5% 5.3%
Restated attributable net profit (% change) 39.0% 24.1% 4.7% (14.4%) 42.4% 1.7% (23.5%) 28.3% 13.0% 18.8% 4.8% 5.2% 5.4% 5.5%
Personnel costs / Sales 32.0% 32.3% 32.1% 33.2% 34.2% 33.2% 33.8% 34.1% 33.3% 32.1% 31.9% 30.8% 30.6% 30.4%
Restated EBITDA margin (**) 7.2% 7.6% 7.7% 6.9% 8.5% 8.6% 10.5% 12.3% 13.0% 12.9% 13.4% 14.1% 14.4% 14.6%
Restated EBITA margin 4.9% 5.2% 5.4% 4.6% 6.1% 6.2% 5.1% 6.6% 7.4% 7.9% 8.1% 8.5% 8.6% 8.7%
Tax rate 20.5% 14.0% 15.5% 16.4% 11.2% 14.3% 14.0% 20.1% 23.9% 28.0% 28.0% 28.0% 28.0% 28.0%
Net margin 3.3% 4.0% 4.1% 3.5% 4.9% 4.7% 3.6% 4.5% 4.8% 5.1% 5.2% 5.5% 5.5% 5.6%
Capex / Sales 3.0% 2.5% 3.1% 3.6% 3.4% 3.6% 4.3% 5.7% 4.4% 5.5% 5.1% 5.0% 5.0% 4.9%
OpFCF / Sales (2.4%) 3.9% 3.2% 3.2% 1.7% 2.8% 6.1% 5.2% 8.3% 6.8% 7.5% 8.6% 8.7% 9.0%
WCR / Sales 6.3% 6.0% 6.5% 5.2% 5.6% 5.6% 6.2% 6.8% 7.4% 6.6% 6.5% 6.4% 6.3% 6.2%
Capital employed (excl. gdw ./intangibles) / Sales 18.3% 18.4% 19.1% 18.4% 20.2% 19.8% 18.6% 16.8% 15.0% 16.5% 18.6% 20.9% 22.7% 24.4%
ROE 14.1% 21.2% 23.4% 17.0% 24.1% 21.5% 15.3% 18.9% 21.9% 24.5% 24.0% 23.6% 21.9% 20.5%
Gearing 20% 26% 24% 15% 26% 23% 97% 99% 105% 108% 108% 106% 92% 81%
EBITDA / Financial charges (**) 16.4x 48.9x 45.7x 24.4x 24.1x 22.7x 70.9x NS NS NS NS NS NS NS
Adjusted financial debt (A)+(B) / EBITDA (**) 0.6x 0.6x 0.5x 0.4x 0.6x 0.6x 2.1x 1.8x 1.7x 1.7x 1.7x 1.7x 1.6x 1.5x
ROCE, excl. gdw ./intangibles 22.7% 24.2% 24.4% 21.6% 26.0% 26.9% 24.3% 31.3% 38.7% 34.6% 31.3% 29.2% 27.4% 25.8%
ROCE, incl. gross goodw ill 9.9% 10.6% 10.9% 9.6% 12.0% 12.8% 7.8% 8.6% 9.8% 10.1% 9.8% 10.5% 11.2% 12.0%
WACC 8.9% 8.7% 8.0% 7.5% 7.5% 7.5% 7.6% 7.5% 7.3% 6.9% 6.9% 6.9% 6.9% 6.9%
Latest Model update: 07 Apr. 21
(a) Intangibles: EUR11,658.00m, or EUR9 per share. (b) adjusted for capital gains/losses, exceptional restructuring charges, capitalized R&D; EBITA also adjusted for impairments and am. of intangibles from M&A (c) after EBITA adjustments
and financial result/tax adjustments (*) In listing currency, w ith div. reinvested, (**) EBITDAR post IFRS16, (1) First application of IFRS 16

TRANSPORT &
INFRASTRUCTURE
NEUTRAL
FEDEX TARGET PRICE USD273 (DOWNSIDE 3%)
Not quite cheap enough

Initiating coverage with Neutral rating and USD273 TP
Price (06 April 2021) USD282.2
Market cap (USDbn / EURbn) 74.8 / 63.3
FedEx has benefitted from a ‘good Covid’ to-date, with the stock +80% since Jan-2020. Trading on
Free float (USDbn / EURbn) 65.1 / 55.1 14.6x 12m forward consensus P/E, FedEx is optically inexpensive, but with consensus expecting
EV (USDbn / EURbn) 95.1 / 80.5
that the FY21 surge in Express and Ground EBIT will continue, we think forecasts could prove
optimistic. We initiate coverage with a Neutral rating, with our USD273 TP providing 3% downside.
Robert Joynson, CFA
(+44) 207 039 9515 Despite parting ways in 2019, FedEx is not immune from Amazon – far from it
[email protected] While FedEx’s direct exposure to Amazon is negligible following its decision to part ways in 2019, it
is far from immune. If Amazon continues to take market share - of the US online retail space in
general and the parcel delivery market more specifically, FedEx will lose share. This is nothing new
– both FedEx/UPS in aggregate have lost share each year since 2011 – but the rate of market
share loss could accelerate. Changes to delivery terms for Amazon Merchants since February
could prove a headwind during CY2021, while the possibility that Amazon may open up its delivery
network to other online retailers – as it has already done in the UK – cannot be ruled out.
Consensus expectations appear optimistic for FedEx’s Express and Ground divisions
Consensus forecasts for both FedEx Express and FedEx Ground appear relatively full, with
revenue growth expected to remain strong (even after a strong FY21) and margins expected to
continue to rise. Given FedEx’s relatively high B2B exposure, US inventory re-stocking will
continue to provide a tailwind for now. But this tailwind is unlikely to strengthen versus recent
quarters and may fade going into 2022. Our FY2022 net income stands -11% vs. consensus.
Valuation: while FedEx is optically cheap, we believe Deutsche Post provides superior value
On 14.6x consensus 12m-forward P/E, FedEx trades at a significant discount to UPS on 18.9x and
a small discount to Deutsche Post’s 16.0x. Relative to DHL Express specifically, however, we
estimate FedEx trades at a premium – of 13.6x 12m-forward EV/EBIT vs. 9.7x for DHL Express.
Similar to UPS, FedEx’s P/E multiple has exhibited a strong historic correlation with the ISM, which
hit a 37-year high last week. Unlike UPS, however, FedEx’s current P/E is distinctly mid-cycle.
EPS, Adjusted (USD) 9.52 16.44 17.09 18.33 P/E (x) 15.5 17.2 16.5 15.4
EPS - Refinitiv (USD) - - - - Net yield (%) 1.8 1.1 1.1 1.1
Net dividend (USD) 2.60 3.00 3.00 3.00 FCF yield (%) (2.0) 1.0 3.0 3.2
EV/Sales (x) 0.8 1.2 1.1 1.0
Sales (USDm) 69,217 82,131 84,602 88,021 EV/EBITDA (x) 8.7 10.1 9.3 8.7
EBITA, Adj. (USDm) 3,122 5,766 6,621 7,047 EV/EBITA (x) 18.8 16.5 14.1 13.1
Net profit, Adj.(USDm) 2,494 4,438 4,615 4,950 EV/CE (x) 1.0 1.6 1.5 1.4
ROCE (%) 4.4 7.6 8.3 8.5
Absolute (%) (1) 10 11 139
Rel. Transport & (3) 0 1 23
Rel. MSCI USA (%) (4) 3 3 51

FEDEX (Neutral) Price at 6 Apr. 21 / Target Price
Freight & Logistics | Transport & Infrastructure - USA USD282.2 / USD273 -3%

FedEx is a USA based logistics company that provides package delivery, freight Price YTD perform ance in EUR (%)
Stock
forw arding and other services to a global client base. FedEx is split across four (06 Apr. 21) Abs. Rel. Sector
divisions, w ith 85% of 2016 revenue generated by the global Express division
American (=) USD 24.1 58.5 38
(52.5%) and the North American focused Ground division (32.9%). Freight and
Services are Fedex's other divisions.
United Airlines (-) USD 59.5 42.9 25
In 2016, Fedex completed the aquistion of TNT Express. Southw est (+) USD 64.1 42.9 25
IAG (+) p 215 41.5 24
Kuehne + Nagel (-) CHF 274.3 33.3 16
easyJet (+) p 1,012 28.4 12

Frederick Smith, Chairman & CEO Wizz Air (-) p 5,090 17.5 3
Alan Graf, CFO Deutsche Post (+) EUR 47.2 16.4 2
FedEx (=) USD 282.2 13.1 (1)
AP Moller (=) DKK 14,775 10.6 (3)
Fraport (-) EUR 54.3 9.9 (4)

Ownership structure Eiffage (+) EUR 86.8 9.8 (4)
Frederick W Smith 7.3% Vinci (+) EUR 89.3 9.8 (4)
The Vanguard Group 6.2% UPS (-) USD 173.0 7.2 (6)
PRIMECAP 6.0% Atlantia (=) EUR 15.7 6.8 (7)
Other Shareholders 80.4% Ryanair (+) EUR 17.0 4.3 (9)
ACS (+) EUR 27.9 4.2 (9)

2016 sales by region Groupe ADP (-) EUR 105.9 (0.2) (13)
Aena SA (-) EUR 139.1 (2.2) (15)
Ferrovial (-) EUR 22.1 (2.3) (15)
InPost SA (=) EUR 15.2 (5.0) (17)
Getlink (-) EUR 13.2 (6.9) (19)

24%
77% USA
Sector calendar
24% International 08 Apr. 21 Vinci: AGM (10:00 CET)
09 Apr. 21 Getlink: Mar Traffic figures 2021 (08:00 CET)
77%
2016 sales by activity 16 Apr. 21 Kansas City Sou: Q1 Earnings 2021 (12:00 CET)
19 Apr. 21 United Airlines: Q1 Earnings 2021 (22:00 CET)
3%
12%
53% Express Zurich Airport : AGM
Norw egian Air S: Q1 Results 2021 (07:00 CET)
33% Ground
53% 12% Freight Southw est: Q1 Earnings 2021 (12:00 CET)

Union Pacific C: Q1 Earnings 2021 (14:00 CET)
3% Services
33% J.B. Hunt Trans: AGM (17:00 CET)
-0.9% Eliminations & Other Vinci: Q1 Revenues 2021 (17:45 CET)
Analyst 28 Apr. 21 Aena SA: Q1 Results 2021
Robert Joynson, CFA (+44) 207 039 9515 Getlink: AGM
[email protected] Groupe ADP: Q1 Revenues 2021 (07:30 CET)

USD282.2 / USD273 -3% FEDEX (Neutral)
Refinitiv / Bloomberg: FDX.N / FDX US Analyst: Robert Joynson, CFA (+44) 207 039 9515 Freight & Logistics | Transport & Infrastructure - USA
Com pany Highlights USDm / EURm
350.0
Enterprise value 95,061 / 80,479
Market capitalisation 74,775 / 63,305 275.0 Target Price
Free float 65,054 / 55,075
225.0
3m average volume 654 / 554
Perform ance (*) 1m 3m 12m 175.0
Absolute 10% 11% 139%
Rel. Sector (0%) 1% 23% 125.0
Rel. MSCI USA 3% 3% 51%
12m Hi/Lo (USD) : 301.5 -6% / 107.5 +162%
CAGR 2005/2020 2020/2023
CFPS 4% 4% Price 6.8*CFPS Relative to MS CI US A ( USD)
Price (yearly avg from May 11 to May 20) 87.8 85.4 93.7 125.0 164.3 155.7 179.4 231.9 208.9 147.6 282.2 282.2 282.2 282.2
PER SHARE DATA (USD) May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
No of shares year end, basic, (m) 315.000 315.000 315.000 307.000 284.000 276.000 266.000 267.000 262.000 261.000 265.000 265.000 265.000 265.000
Avg no of shares, diluted, excl. treasury stocks (m) 317.000 317.000 317.000 310.000 287.000 279.000 270.000 272.000 265.000 262.000 270.000 270.000 270.000 270.000
EPS company definition 4.57 6.41 4.94 7.58 3.58 6.39 11.10 16.80 1.91 4.91 16.13 17.09 18.33 19.35
% change 27.0% 33.5% (3.9%) 13.3% 26.9% 20.0% (0.4%) 26.9% 14.6% (38.8%) 72.7% 4.0% 7.3% 5.6%
Book value (BVPS) (a) 48.3 46.8 55.2 49.8 52.8 49.9 60.4 72.7 67.8 70.1 82.3 96.7 112.3 129.0
Net dividend 0.48 0.52 0.56 0.60 0.80 1.00 1.60 2.00 2.60 2.60 3.00 3.00 3.00 3.00
STOCKMARKET RATIOS May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
P / E relative to MSCI USA 121% 91% 94% 94% 94% 80% 85% 77% 72% 79% 58% 69% 73% 76%
P / CF 6.4x 5.1x 6.0x 7.4x 8.8x 7.0x 6.8x 7.8x 6.8x 4.2x 9.6x 9.5x 8.9x 8.5x
FCF yield 2.6% 3.2% 4.8% 2.3% 2.7% 2.9% (0.4%) (1.6%) 0.2% (2.0%) 1.0% 3.0% 3.2% 3.5%
P / BVPS 1.82x 1.83x 1.70x 2.51x 3.11x 3.12x 2.97x 3.19x 3.08x 2.11x 3.43x 2.92x 2.51x 2.19x
Net yield 0.5% 0.6% 0.6% 0.5% 0.5% 0.6% 0.9% 0.9% 1.2% 1.8% 1.1% 1.1% 1.1% 1.1%
Payout 9.9% 8.0% 9.0% 8.5% 8.9% 9.3% 14.9% 14.7% 16.7% 27.3% 18.2% 17.6% 16.4% 15.5%
EV / Restated EBITDA 6.3x 5.5x 5.4x 7.6x 8.5x 7.6x 7.9x 9.8x 8.6x 8.7x 10.1x 9.3x 8.7x 8.1x
EV / OpFCF 23.4x 24.6x 15.3x 23.8x 20.5x 21.7x 88.5x NS 66.2x NS 46.3x 22.0x 20.4x 18.9x
ENTERPRISE VALUE (USDm ) 28,122 29,054 29,909 42,419 52,644 55,058 59,714 75,899 73,505 58,774 95,061 93,610 91,992 90,195
Market cap 27,651 26,908 29,513 38,376 46,494 42,962 47,725 61,919 54,722 38,533 74,775 74,775 74,775 74,775
+ Adjusted net debt 136 (392) (1,149) 2,587 4,216 10,733 11,493 13,871 15,793 17,122 17,167 15,716 14,098 12,301
+ Revalued minority interests
- Revalued investments 1,231 1,212 1,054 1,047 1,443 3,044 2,789 3,862 4,004 4,004 4,004 4,004 4,004 4,004
P & L HIGHLIGHTS (USDm ) May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
Sales 39,304 42,680 44,287 45,567 47,453 50,365 60,319 65,450 69,693 69,217 82,131 84,602 88,021 91,598
Restated EBITDA (b) 4,462 5,321 5,584 5,617 6,178 7,261 7,561 7,747 8,573 6,737 9,402 10,026 10,625 11,164
Depreciation (1,973) (2,113) (2,386) (2,587) (2,611) (2,631) (2,995) (3,095) (3,353) (3,615) (3,636) (3,406) (3,577) (3,766)
Restated EBITA (b) 2,489 3,208 3,198 3,030 3,567 4,630 4,566 4,652 5,220 3,122 5,766 6,621 7,047 7,399
Net f inancial income (charges) (113) (45) (96) (157) (240) (337) 13 81 (3,811) (748) (186) (742) (742) (742)
Aff iliates 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Tax (813) (1,109) (894) (1,334) (577) (920) (1,582) 219 (115) (383) (1,107) (1,264) (1,356) (1,431)
Minorities 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net attributable profit reported 1,452 2,032 1,561 2,324 1,050 1,820 2,997 4,572 540 1,286 4,317 4,615 4,950 5,225
CASH FLOW HIGHLIGHTS (USDm ) May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
EBITDA (reported) 4,440 5,390 5,597 6,165 4,685 6,148 7,561 7,747 8,573 6,737 9,402 10,026 10,625 11,164
EBITDA adjustm ent (b) 22 (69) (13) (548) 1,493 1,113 0 0 0 0 0 0 0 0
Other items 335 250 (52) 496 487 287 432 1,100 519 3,127 (156) 0 0 0
Change in WCR (163) (382) (200) (795) 255 (191) (2,202) (3,460) (2,491) (4,092) (1,495) (285) (381) (394)
Operating cash flow 4,634 5,189 5,332 5,318 6,920 7,357 5,791 5,387 6,601 5,772 7,752 9,742 10,244 10,770
Capex (3,434) (4,007) (3,375) (3,533) (4,347) (4,818) (5,116) (5,663) (5,490) (5,868) (5,700) (5,481) (5,724) (5,997)
Operating free cash flow (OpFCF) 1,200 1,182 1,957 1,785 2,573 2,539 675 (276) 1,111 (96) 2,052 4,260 4,519 4,773
Net f inancial items + tax paid (480) (309) (548) (897) (1,314) (1,312) (861) (713) (988) (675) (1,293) (2,006) (2,098) (2,173)
Free cash flow 720 873 1,409 888 1,259 1,227 (186) (989) 123 (771) 759 2,254 2,422 2,600
Net f inancial investments & acquisitions 15 (42) (428) (18) (1,405) (4,628) 135 (14) 17 22 0 0 0 0
Other (46) (70) (81) (119) (322) (300) (111) (150) 0 (14,080) 0 0 0 0
Capital increase (decrease) 108 (69) 34 (4,300) (934) (2,539) (172) (690) (1,379) 61 0 0 0 0
Dividends paid (151) (164) (177) (187) (227) (277) (426) (535) (683) (679) (804) (804) (804) (804)
Increase (decrease) in net financial debt (646) (528) (757) 3,736 1,629 6,517 760 2,378 1,922 15,447 45 (1,451) (1,618) (1,797)
Cash flow , group share 4,317 5,262 4,984 5,216 5,351 6,236 7,132 8,134 8,104 9,189 7,953 8,021 8,527 8,991
BALANCE SHEET HIGHLIGHTS (USDm ) May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
WCR 1,093 1,256 858 1,464 1,240 476 763 1,791 2,718 3,132 4,627 4,912 5,293 5,687
Shareholders' funds, group share 15,220 14,727 17,398 15,277 14,993 13,784 16,073 19,416 17,757 18,295 21,809 25,620 29,766 34,188
Minorities 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net f inancial debt (cash) 136 (392) (1,149) 2,587 4,216 10,733 11,493 13,871 15,793 31,240 31,285 29,834 28,216 26,419
FINANCIAL RATIOS (%) May 11 May 12 May 13 May 14 May 15 May 16 May 17 May 18 May 19 May 20 May 21e May 22e May 23e May 24e
Sales (% change) 13.2% 8.6% 3.8% 2.9% 4.1% 6.1% 19.8% 8.5% 6.5% (0.7%) 18.7% 3.0% 4.0% 4.1%
Organic sales grow th
Restated EBITA (% change) 30.5% 28.9% (0.3%) (5.3%) 17.7% 29.8% (1.4%) 1.9% 12.2% (40.2%) 84.7% 14.8% 6.4% 5.0%
Restated attributable net profit (% change) 28.2% 33.5% (3.9%) 10.8% 17.4% 16.7% (3.6%) 27.8% 11.6% (39.5%) 78.0% 4.0% 7.3% 5.6%
Restated EBITDA margin 11.4% 12.5% 12.6% 12.3% 13.0% 14.4% 12.5% 11.8% 12.3% 9.7% 11.4% 11.9% 12.1% 12.2%
Tax rate 35.9% 35.3% 36.4% 36.5% 35.5% 33.6% 34.5% NC 17.6% 22.9% 20.4% 21.5% 21.5% 21.5%
Net margin 3.9% 4.8% 4.5% 4.8% 5.4% 6.0% 4.8% 5.6% 5.9% 3.6% 5.4% 5.5% 5.6% 5.7%
Capex / Sales 8.7% 9.4% 7.6% 7.8% 9.2% 9.6% 8.5% 8.7% 7.9% 8.5% 6.9% 6.5% 6.5% 6.5%
OpFCF / Sales 3.1% 2.8% 4.4% 3.9% 5.4% 5.0% 1.1% (0.4%) 1.6% (0.1%) 2.5% 5.0% 5.1% 5.2%
WCR / Sales 2.8% 2.9% 1.9% 3.2% 2.6% 0.9% 1.3% 2.7% 3.9% 4.5% 5.6% 5.8% 6.0% 6.2%
ROE 10.1% 14.0% 11.4% 14.3% 17.2% 21.8% 18.0% 19.0% 23.2% 13.6% 20.4% 18.0% 16.6% 15.3%
Gearing 1% (3%) (7%) 17% 28% 78% 72% 71% 89% 94% 79% 61% 47% 36%
EBITDA / Financial charges 39.5x NS 58.2x 35.8x 25.7x 21.5x NC NC 2.2x 9.0x 50.6x 13.5x 14.3x 15.0x
Adjusted financial debt / EBITDA 0.0x NC NC 0.5x 0.7x 1.5x 1.5x 1.8x 1.8x 2.5x 1.8x 1.6x 1.3x 1.1x
WACC 9.2% 9.7% 9.3% 8.1% 7.6% 6.6% 6.7% 6.7% 6.8% 6.1% 6.3% 6.3% 6.3% 6.3%
(a) Intangibles: USD6,372.00m, or USD24 per share. (b) adjusted for capital gains/losses, exceptional restructuring charges, capitalized R&D; EBITA also adjusted for impairments and am. of intangibles from M&A
(c) after EBITA adjustments and financial result/tax adjustments, (*) In listing currency, w ith div. reinvested

TRANSPORT &
INFRASTRUCTURE
UNDERPERFORM
UPS TARGET PRICE USD150 (DOWNSIDE 13%)
Amazon exposure suggests caution

Initiating coverage with Underperform rating and USD150 TP
Price (06 April 2021) USD173.0
Market cap (USDbn / EURbn) 151 / 128
Like its peers, UPS has benefitted significantly from the Covid-driven acceleration in parcel
Free float (USDbn / EURbn) 151 / 128 volumes, with the shares +44% since Jan-2020. While much of this increase is justified, with the
EV (USDbn / EURbn) 179 / 151
stock trading on a near-peak multiple on earnings that we feel may prove glass-half-full, we initiate
coverage with an Underperform rating. Our USD150 TP stands 13% below the current share price.
Robert Joynson, CFA
(+44) 207 039 9515 High Amazon exposure was helpful in 2020, but could prove a headwind going forward
[email protected] After picking up some of the business discontinued by FedEx in 2019, we estimate Amazon
accounts for 21% of US Domestic Package revenue. In the context of our analysis which reveals
the recent acceleration in Amazon’s US direct delivery capabilities, we consider this exposure
disadvantageous. The problems that FedEx experienced following its decision to part ways with
Amazon provide a recent reminder of how problematic exposure to a large customer can be.
Consensus expectations appear glass-half-full

While consensus forecasts for UPS International Package appear reasonable, for US Domestic we
feel expectations may prove optimistic, with robust ongoing revenue growth despite; (i) recent
Covid-driven tailwinds; (ii) the US vaccine rollout suggesting a shift to towards spending on
services in H2; and (iii) risks around Amazon. With the US Domestic margin expected to revert
back to >9%, consensus appears glass-half-full on both the revenue and the margin – potentially
inconsistent with UPS’ ‘Better not bigger’ focus. Our 2022 EPS stands -15% vs. consensus.
Valuation: the combination of near-peak multiple and a peak ISM suggests caution
Trading towards the top end of its historic range on 19x 12m-fwd consensus P/E, UPS is valued at
a near-peak multiple on peak earnings. With UPS’ P/E showing a strong positive correlation with
the ISM, which hit a 37-year high last week, multiple risk appears to the downside on a 1-year view.
As such, if consensus EPS forecasts do prove optimistic, share price risk also appears to the
downside. One offsetting factor is that pension liabilities worth USD5.5bn (3.6% of market cap) may
soon be removed following changes to multi-employer pension plans.
EPS, Adjusted (USD) 6.21 7.72 7.76 7.83 P/E (x) 20.9 22.4 22.3 22.1
EPS - Refinitiv (USD) - - - - Net yield (%) 3.1 2.4 2.4 2.4
Net dividend (USD) 4.01 4.09 4.11 4.15 FCF yield (%) 4.5 4.1 3.5 3.5
EV/Sales (x) 1.7 2.0 1.9 1.8
Sales (USDm) 84,628 88,777 91,969 96,645 EV/EBITDA (x) 12.5 14.3 14.0 13.8
EBITA, Adj. (USDm) 8,718 9,787 9,836 9,860 EV/EBITA (x) 16.4 18.3 18.0 17.8
Net profit, Adj.(USDm) 5,412 6,725 6,763 6,823 EV/CE (x) 3.4 4.1 3.9 3.7
ROCE (%) 15.8 17.5 16.8 16.2
Absolute (%) 3 5 8 85
Rel. Transport & 1 (4) (3) (5)
Rel. MSCI USA (%) (1) (1) 0 17

UPS (Underperform) Price at 6 Apr. 21 / Target Price
Freight & Logistics | Transport & Infrastructure - USA USD173.0 / USD150 -13%

UPS is a USA based logistics company that provides package delivery, freight Price YTD perform ance in EUR (%)
Stock
forw arding and other services to a global client base. UPS is split into 3 divisions: (06 Apr. 21) Abs. Rel. Sector
U.S Domestic package provides ground and air package delivery services w ithin the
American (=) USD 24.1 58.5 38
US; International package houses all international package services. These tw o
divisions contributed 84% of total revenue in 2015. UPS also provides air and sea
freight forw arding services as w ell as other supply chain solutions in the Supply United Airlines (-) USD 59.5 42.9 25
chain & freight division. Southw est (+) USD 64.1 42.9 25
IAG (+) p 215 41.5 24
Kuehne + Nagel (-) CHF 274.3 33.3 16
easyJet (+) p 1,012 28.4 12

David Abney, Chairman & CEO Wizz Air (-) p 5,090 17.5 3
Richard Peretz, CFO Deutsche Post (+) EUR 47.2 16.4 2
Scott Childress, Investor Relations FedEx (=) USD 282.2 13.1 (1)
AP Moller (=) DKK 14,775 10.6 (3)
Fraport (-) EUR 54.3 9.9 (4)
Eiffage (+) EUR 86.8 9.8 (4)

Ownership structure Vinci (+) EUR 89.3 9.8 (4)
The Vanguard Group 6.4% UPS (-) USD 173.0 7.2 (6)
BlackRock 4.3% Atlantia (=) EUR 15.7 6.8 (7)
Wellington 4.3% Ryanair (+) EUR 17.0 4.3 (9)
Other Shareholders 85.0% ACS (+) EUR 27.9 4.2 (9)
Groupe ADP (-) EUR 105.9 (0.2) (13)

2015 sales by region Aena SA (-) EUR 139.1 (2.2) (15)
Ferrovial (-) EUR 22.1 (2.3) (15)
InPost SA (=) EUR 15.2 (5.0) (17)
Getlink (-) EUR 13.2 (6.9) (19)
22%
Sector calendar
78% USA
08 Apr. 21 Vinci: AGM (10:00 CET)
22% International Ferrovial: AGM (12:30 CET)
09 Apr. 21 Getlink: Mar Traffic figures 2021 (08:00 CET)
78%
16 Apr. 21 Kansas City Sou: Q1 Earnings 2021 (12:00 CET)
2015 sales by activity 19 Apr. 21 United Airlines: Q1 Earnings 2021 (22:00 CET)
16% Zurich Airport : AGM
Norw egian Air S: Q1 Results 2021 (07:00 CET)
63% US Domestic package
Southw est: Q1 Earnings 2021 (12:00 CET)
21% International package Union Pacific C: Q1 Earnings 2021 (14:00 CET)
21%
J.B. Hunt Trans: AGM (17:00 CET)
16% Supply chain & freight
63% Vinci: Q1 Revenues 2021 (17:45 CET)
28 Apr. 21 Aena SA: Q1 Results 2021
Analyst Getlink: AGM
Robert Joynson, CFA (+44) 207 039 9515 Groupe ADP: Q1 Revenues 2021 (07:30 CET)
[email protected] Aena SA: AGM (12:00 CET)

USD173.0 / USD150 -13% UPS (Underperform)
Refinitiv / Bloom berg: UPS.N / UPS US Analyst: Robert Joynson, CFA (+44) 207 039 9515 Freight & Logistics | Transport & Infrastructure - USA
Com pany Highlights USDm / EURm
200.0
Enterprise value 178,661 / 151,255
Market capitalisation 151,056 / 127,884
Target Price
Free float 150,799 / 127,666 140.0
3m average volume 579 / 490
Perform ance (*) 1m 3m 12m 100.0
Absolute 5% 8% 85%
Rel. Sector (4%) (3%) (5%)
Rel. MSCI USA (1%) (0%) 17%
60.0
12m Hi/Lo (USD) : 176.5 -2% / 90.4 +91%
CAGR 2006/2021 2021/2025
CFPS 5% 3% Price 12.1*CFPS Relative to MS CI US A ( USD)
Price (yearly avg from Dec. 12 to Dec. 20) 75.7 88.6 100.7 100.7 105.9 111.9 113.5 110.8 129.8 173.0 173.0 173.0 173.0 173.0
PER SHARE DATA (USD) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e De c. 25e
No of shares year end, basic, (m) 953.000 923.000 905.000 886.000 873.305 873.305 873.305 873.305 873.305 873.305 873.305 873.305 873.305 873.305
Avg no of shares, diluted, excl. treasury stocks (m) 969.000 948.000 924.000 906.000 887.000 875.000 870.000 869.000 871.000 871.000 871.000 871.000 871.000 871.000
EPS company definition 0.84 4.65 3.31 5.38 3.89 5.64 5.53 5.14 1.55 8.24 8.28 8.35 8.84 9.36
% change (18.7%) 29.7% (21.1%) 43.4% 11.0% 6.3% 63.0% (30.1%) 0.6% 24.3% 0.6% 0.9% 6.2% 6.3%
Book value (BVPS) (a) 4.9 7.0 2.4 2.8 0.5 1.1 3.5 3.7 0.8 4.8 9.0 13.1 17.5 22.1
Net dividend 2.30 2.53 2.71 2.97 3.15 3.31 3.61 3.80 4.01 4.09 4.11 4.15 4.39 4.65
STOCKMARKET RATIOS Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
P / E relative to MSCI USA 151% 116% 160% 122% 105% 93% 69% 91% 71% 93% 106% 115% 111%
P / CF 10.3x 11.5x 17.1x 11.9x 13.1x 33.3x 9.3x 11.3x 12.1x 15.2x 15.1x 14.9x 14.3x 13.6x
FCF yield 7.0% 6.3% 3.7% 5.6% 3.8% (3.8%) 6.5% 2.4% 4.5% 4.1% 3.5% 3.5% 3.7% 4.0%
P / BVPS 15.50x 12.64x 42.58x 36.12x NS 97.68x 32.80x 29.61x NS 35.72x 19.32x 13.20x 9.89x 7.81x
Net yield 3.0% 2.9% 2.7% 2.9% 3.0% 3.0% 3.2% 3.4% 3.1% 2.4% 2.4% 2.4% 2.5% 2.7%
Payout 73.3% 62.2% 84.5% 64.6% 61.7% 61.0% 40.8% 61.5% 64.5% 53.0% 52.9% 53.0% 52.8% 52.6%
EV / Restated EBITDA 11.7x 11.0x 14.4x 11.6x 11.4x 12.5x 12.8x 11.7x 12.5x 14.3x 14.0x 13.8x 13.1x 12.4x
EV / OpFCF 11.3x 11.1x 20.1x 14.6x 19.1x NS 17.4x 110.4x 44.3x 20.4x 22.4x 22.1x 20.9x 19.5x
ENTERPRISE VALUE (USDm ) 84,035 92,916 106,505 107,062 113,447 122,826 122,579 123,287 142,672 178,661 177,000 175,320 173,531 171,553
Market cap 72,629 83,324 92,271 90,731 93,481 97,422 98,274 95,711 112,511 151,056 151,056 151,056 151,056 151,056
+ Adjusted net debt 4,946 5,627 7,504 9,608 11,508 20,220 17,701 19,497 18,338 15,783 14,121 12,442 10,652 8,675
+ Revalued minority interests
- Revalued investments 0 0 0 0 0 0 0 0 0 0 0 0 0 0
P & L HIGHLIGHTS (USDm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
Sales 54,127 55,438 58,232 58,363 60,906 65,872 71,861 74,094 84,628 88,777 91,969 96,645 101,550 106,763
Restated EBITDA (b) 7,202 8,414 7,398 9,195 9,927 9,822 9,591 10,510 11,416 12,536 12,637 12,714 13,259 13,848
Depreciation (1,858) (1,867) (1,923) (2,084) (2,224) (2,282) (2,207) (2,360) (2,698) (2,749) (2,801) (2,854) (2,908) (2,963)
Restated EBITA (b) 5,344 6,547 5,475 7,111 7,703 7,540 7,384 8,150 8,718 9,787 9,836 9,860 10,351 10,885
Net f inancial income (charges) (369) (360) (331) (326) (331) (381) (1,005) (2,146) (5,840) (510) (510) (455) (400) (340)
Af filiates 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Other 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Tax (167) (2,302) (1,605) (2,498) (1,705) (2,238) (1,228) (1,212) (501) (2,134) (2,145) (2,163) (2,289) (2,425)
Minorities 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net attributable prof it reported 807 4,372 3,032 4,844 3,431 4,910 4,791 4,440 1,343 7,143 7,181 7,242 7,663 8,119
CASH FLOW HIGHLIGHTS (USDm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
EBITDA (reported) 3,201 8,901 6,891 9,752 7,691 9,811 9,231 10,158 11,068 12,536 12,637 12,714 13,259 13,848
EBITDA adjustm ent (b) 4,001 (487) 507 (557) 2,236 11 360 352 348 0 0 0 0 0
Other items 2,251 2,045 (70) 747 (308) (4,896) 1,675 (3,149) (3,867) 0 0 0 0 0
Change in WCR 132 (34) 288 (254) (709) (1,460) 2,042 136 1,081 235 32 57 (6) (8)
Operating cash flow 9,585 10,425 7,616 9,688 8,910 3,466 13,308 7,497 8,630 12,770 12,668 12,770 13,253 13,840
Capex (2,153) (2,065) (2,328) (2,379) (2,965) (5,227) (6,283) (6,380) (5,412) (4,000) (4,762) (4,852) (4,944) (5,037)
Operating free cash flow (OpFCF) 7,432 8,360 5,288 7,309 5,945 (1,761) 7,025 1,117 3,218 8,770 7,907 7,919 8,309 8,803
Net f inancial items + tax paid (2,369) (3,121) (1,890) (2,258) (2,437) (1,987) (597) 1,142 1,829 (2,644) (2,655) (2,618) (2,689) (2,766)
Free cash flow 5,063 5,239 3,398 5,051 3,508 (3,748) 6,428 2,259 5,047 6,127 5,252 5,300 5,621 6,037
Net f inancial investments & acquisitions (5) 82 (35) (1,878) (459) (110) 35 59 20 0 0 0 0 0
Other 299 (395) (453) (299) 127 (517) (162) (3,063) (766) 0 0 0 0 0
Capital increase (decrease) (1,320) (3,347) (2,421) (2,453) (2,433) (1,566) (771) (786) 61 0 0 0 0 0
Dividends paid (2,130) (2,260) (2,366) (2,525) (2,643) (2,771) (3,011) (3,194) (3,374) (3,571) (3,590) (3,621) (3,831) (4,060)
Increase (decrease) in net financial debt (1,907) 681 1,877 2,104 1,900 8,712 (2,519) 4,725 (988) (2,555) (1,661) (1,680) (1,789) (1,977)
Cash flow , group share 7,084 7,338 5,438 7,684 7,182 2,939 10,669 8,503 9,378 9,892 9,982 10,096 10,571 11,082
BALANCE SHEET HIGHLIGHTS (USDm ) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e Dec. 25e
WCR 1,238 1,094 875 2,178 2,478 1,931 (237) 439 1,152 917 886 829 835 843
Shareholders' f unds, group share 4,653 6,474 2,141 2,470 405 1,000 3,021 3,267 657 4,228 7,819 11,440 15,271 19,331
Minorities 80 14 17 21 24 30 16 16 12 12 12 12 12 12
Net f inancial debt (cash) 4,946 5,627 7,504 9,608 11,508 20,220 17,701 22,426 21,438 18,883 17,221 15,542 13,752 11,775
FINANCIAL RATIOS (%) Dec. 12 Dec. 13 Dec. 14 Dec. 15 Dec. 16 Dec. 17 Dec. 18 Dec. 19 Dec. 20 Dec. 21e Dec. 22e Dec. 23e Dec. 24e De c. 25e
Sales (% change) 1.9% 2.4% 5.0% 0.2% 4.4% 8.2% 9.1% 3.1% 14.2% 4.9% 3.6% 5.1% 5.1% 5.1%
Organic sales grow th
Restated EBITA (% change) (16.9%) 22.5% (16.4%) 29.9% 8.3% (2.1%) (2.1%) 10.4% 7.0% 12.3% 0.5% 0.2% 5.0% 5.2%
Restated attributable net profit (% change) (20.6%) 26.8% (23.1%) 40.6% 8.7% 4.8% 62.1% (30.2%) 0.8% 24.3% 0.6% 0.9% 6.2% 6.3%
Restated EBITDA margin 13.3% 15.2% 12.7% 15.8% 16.3% 14.9% 13.3% 14.2% 13.5% 14.1% 13.7% 13.2% 13.1% 13.0%
Tax rate 17.1% 34.5% 34.6% 34.0% 33.2% 31.3% 20.4% 21.4% 27.2% 23.0% 23.0% 23.0% 23.0% 23.0%
Net margin 5.6% 7.0% 5.1% 7.1% 7.4% 7.2% 10.7% 7.2% 6.4% 7.6% 7.4% 7.1% 7.1% 7.2%
Capex / Sales 4.0% 3.7% 4.0% 4.1% 4.9% 7.9% 8.7% 8.6% 6.4% 4.5% 5.2% 5.0% 4.9% 4.7%
OpFCF / Sales 13.7% 15.1% 9.1% 12.5% 9.8% (2.7%) 9.8% 1.5% 3.8% 9.9% 8.6% 8.2% 8.2% 8.2%
WCR / Sales 2.3% 2.0% 1.5% 3.7% 4.1% 2.9% (0.3%) 0.6% 1.4% 1.0% 1.0% 0.9% 0.8% 0.8%
ROE 65.3% 59.5% 138.4% 168.6% NS 474.5% 254.6% 164.4% NS 159.0% 86.5% 59.6% 47.4% 39.8%
Gearing 105% 87% 348% 386% NS NS NS NS NS 372% 180% 109% 70% 45%
EBITDA / Financial charges 19.5x 23.4x 22.4x 28.2x 30.0x 25.8x 9.5x 4.9x 2.0x 24.6x 24.8x 27.9x 33.2x 40.7x
Adjusted financial debt / EBITDA 0.7x 0.7x 1.0x 1.0x 1.2x 2.1x 1.8x 1.9x 1.6x 1.3x 1.1x 1.0x 0.8x 0.6x
WACC 8.9% 8.1% 7.7% 7.2% 7.3% 6.8% 7.2% 7.0% 7.0% 6.9% 6.9% 6.9% 6.9% 6.9%
(a) Intangibles: USD5,641.00m, or USD6 per share. (b) adjusted f or capital gains/losses, exceptional restructuring charges, capitalized R&D; EBITA also adjusted for impairments and am. of intangibles f rom M&A
(c) after EBITA adjustments and financial result/tax adjustments, (*) In listing currency, w ith div. reinvested

Investment case, valuation and risks
Deutsche Post DHL (Outperform, Target Price EUR52)

Investment case
Deutsche Post is well positioned for future EBIT growth, with DHL ideally placed to
take advantage of the burgeoning e-commerce market. With peers such as DPD in
Europe showing strong margins and B2C growth, we see no reason why DHL's push
to develop a network outside of Germany will not prove successful. Initiatives to
expand its B2B e-commerce business will support any fluctuations in the B2C market
as parcel volume growth settles from historic highs. Its minimal exposure to US
Domestic (following an exit in the late-2000s) and Amazon (c.1% of revenue globally)
reflects positively in comparison to global competitors who face greater market share
pressure.
Valuation methodology
Our target price is based on 17x 2022 P/E.
Risks
To the upside:
We include only a minimal EBIT contribution from the International Parcel business,
which could prove conservative. In Express, for which we forecast that the EBIT margin
rises only gradually during the years ahead, this is far from a best-case scenario.
Further upside risks include further online retail penetration and margin improvements
from a significant expansion of B2B e-commerce volumes.
To the downside:
Key downside risks include (1) International Express shipments being weaker than
anticipated, (2) B2C parcel volumes not remaining as persistent as expected, and (3)
B2B e-commerce playing a less significant role and being less accretive than
anticipated.
FedEx (Neutral, Target Price USD273)

Investment case
FedEx’s recent strong revenue growth somewhat masks a change in the competitive
environment in the US Domestic market, with Amazon Logistics positioning itself as a
key competitor. This exposes incumbents to further market share losses, although
FedEx’s exposure is less than some others given they have already lost the vast
majority of their Amazon volumes. We believe consensus forecasts do not fully reflect
this challenge nor the margin pressure felt in US Domestic over recent years.
Our target price is based on 2022 16x P/E.
Risks
To the upside:
Key risks to our target price for FedEx include (1) lower than anticipated market share
gains by Amazon Logistics, easing the pressure on incumbents, (2) further online retail
penetration, (3) a reversal of the US Domestic margin decline seen in recent years,
and (4) a reversal of the share losses experienced in International Express.
To the downside:
Key risks to our target price include (1) more rapid loss of market share driven by
volume growth at Amazon Logistics, (2) B2C parcel volumes not remaining as
persistent as expected, (3) continued margin pressure in the main US Domestic
market, and (4) further share gains by competitors in the International Express space.

UPS (Underperform, Target Price USD150)
Investment case
The competitive environment in the US Domestic market is intensifying, which we
believe the market is not fully reflecting. Incumbents have been losing share to
Amazon Logistics, and a step-change in its capabilities will add further pressure. UPS
is particularly exposed to this given the high proportion of business it does with
Amazon (c.21% of US Domestic revenue). We believe consensus forecasts do not
fully reflect this challenge nor the margin pressure felt in US Domestic over recent
years.
Our target price is based on 18x 2022 P/E.
Risks
To the upside:
Key risks on the upside include; (1) less volume pressure than anticipated from a
slowdown in Amazon Logistics’ capability expansion, (2) further online retail
penetration, (3) a reversal of the US Domestic margin decline seen in recent years,
and (4) a successful ramp up in International Express, slowing the share losses to
competitors.
To the downside:
Key risks to the downside include; (1) an acceleration in Amazon Logistics’ capabilities,
enabling it to take more volumes and market share, (2) B2C parcel volumes not
remaining as persistent as expected, (3) continued margin decline in the key US
Domestic market, and (4) further share gains by competitors in the International
Express space.

DISCLOSURE APPENDIX
Analyst Certification
I, Robert Joynson, (authors of or contributors to the report) hereby certify that all of the views expressed in this report accurately reflect my personal view(s) about the
company or companies and securities discussed in this report. No part of my compensation was, is, or will be, directly, or indirectly, related to the specific
recommendations or views expressed in this research report.
Non-US Research Analyst Disclosure

The research analysts named below were involved in preparing this research report. Research analysts at Exane SA (including Exane SA branches, based in the
United Kingdom, in the European Economic Area or Switzerland) are not associated persons of Exane Inc. and thus are not registered or qualified in the U.S. as
research analysts with the Financial Industry Regulatory Authority (FINRA) or the New York Stock Exchange (NYSE). These non-U.S. analysts are not subject to the
NASD Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst
account.
Robert Joynson Exane SA
London branch
Exane SA is regulated by the Autorité de contrôle prudentiel et de regulation (“ACPR”) and by the Autorité des Marchés Financiers (“AMF”) in France.
Exane SA branches based in the European Economic Area are authorized and regulated by ACPR and by the local relevant regulator.
Exane SA Geneva Branch is authorized and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”)
Exane SA, London Branch is deemed authorised and regulated by the Financial Conduct Authority. Details of the Financial Services Contracts Regime, which allows
EEA-based firms to operate in the UK for a limited period to carry on activities which are necessary for the performance of pre-existing contracts, are available on the
Financial Conduct Authority’s website.
Exane Inc. is regulated by FINRA and the U.S. Securities and Exchange Commission in the United States.
Research Analyst Compensation

The research analyst(s) responsible for the preparation of this report receive(s) compensation based upon various factors including overall firm revenues, which may
include investment banking activities.
Research Analyst-Specific Disclosures

The research analyst(s) responsible for the preparation of this report (or members of their household) may have a relationship with the companies covered by this
research report, as described in the numbered disclosures below. The table immediately below indicates which, if any, of these disclosures apply to the research
analyst(s) responsible for preparation of this research report.
Research Analyst(s) Companies Disclosures
NONE
1 – The research analyst(s) responsible for the preparation of this report or a member of his/her household has/have a financial interest in the securities of the subject
company/ies, as indicated in the previous table.
2 – The research analyst(s) responsible for the preparation of this report or a member of his/her household serve(s) as an officer, director or advisory board member of
the subject company/ies indicated in the previous table.
3 – The research analyst(s) responsible for the preparation of this report received compensation from the subject company/ies indicated in the previous table in the
past twelve months.
Exane-Specific Regulatory Disclosures

Exane SA (including Exane SA branches, based in the United Kingdom, in the European Economic Area and in Switzerland) and Exane Inc. (collectively, “Exane”)
may have a relationship with the companies covered by this research report, as described in the numbered disclosures below. The table immediately below indicates
which, if any, of these disclosures apply to Exane’s relationship with the subject company/ies.
Companies Disclosures
NONE
1 – Exane beneficially owns 1% or more of any class of common equity securities of the subject company/ies.
2 – Exane managed or co-managed an offering of Equity securities for the subject company/ies in the past 12 months.
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Exane with regards to the subject company/ies are those when Exane is distributor or underwriter for Equity securities offerings managed-or co-managed by BNP
Paribas, when BNP Paribas managed or co-managed an offering of Equity securities for the subject company/ies).
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months.
14 – Sections of this report, with the research summary, target price and rating removed, have been presented to the subject company/ies prior to its distribution, for
the sole purpose of verifying the accuracy of factual statements.
15 – Following the presentation of sections of this report to this subject company, some conclusions were amended.
Commitment to transparency on potential conflicts of interest: BNP Paribas

While BNP Paribas (“BNPP”) holds a material ownership interest in the various Exane entities, Exane and BNPP have entered into an agreement to maintain the
independence of Exane's research reports from BNPP. These research reports are published under the brand name “Exane BNP Paribas”. Nevertheless, for the sake
of transparency, we separately identify potential conflicts of interest with BNPP regarding the company/(ies) covered by this research document.
BNP Paribas-related disclosures

BNPP may have a relationship with the companies covered by this research report, as described in the numbered disclosures below. The table immediately below
indicates which, if any, of these disclosures apply to BNPP’s relationship with the subject company/ies.
Companies Disclosures
Deutsche Post DHL 4; 5
1 – BNPP beneficially owns 1% or more of any class of common equity securities of the subject company/ies
2 – BNPP managed or co-managed an offering of Equity securities for the subject company/ies in the past 12 months
3 – BNPP acted as Advisor in a Public Offer involving the subject Company/ies in the past 12 months.
4 – BNPP received compensation for investment banking services from the subject company/ies in the past 12 months
5 – BNPP expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months
6 – A member of senior BNPP management is a member of the Board of the subject company
7 – BNPP beneficially owns at least 0.5% long or short position of the subject company/ies.

Explanation of Research Ratings
Stock Rating
Exane’s Ratings are relative ratings defined against the performance of the MSCI Europe sector for European names, and the stock's MSCI USA sector for US
names.
Outperform (O/P): The stock is expected to outperform the stock’s MSCI Europe sector for European names, and the stock's MSCI USA sector for US names over a
12-month investment horizon.
Neutral: The stock is expected to perform in line with the performance of the stock’s MSCI Europe sector for European names, and the stock's MSCI USA sector for
US names over a 12-month investment horizon.
Underperform (U/P): The stock is expected to underperform the stock’s MSCI Europe sector for European names, and the stock's MSCI USA sector for US names
over a 12-month investment horizon.
Under review: The rating of the stock has been placed under review after significant news. Any possible change will be confirmed as soon as possible in the form of a
new broadly disseminated report
Restricted (RS): The stock is covered by Exane but there is no Rating and no Target Price because Exane is involved in an equity capital market transaction relating
to the subject company.
Not Rated (NR): The stock is covered by Exane but there is no Rating and no Target Price at this time.
Not Covered (NC): Exane does not cover this company.
Distribution of Exane BNP Paribas’ equity recommendations

As at 06/04/2021 Exane BNP Paribas covered 757 companies. The companies that, for regulatory reasons, are not accorded a rating by Exane BNP Paribas are
excluded from these statistics. For regulatory reasons, our ratings of Outperform, Neutral and Underperform correspond respectively to Buy, Hold and Sell; the
underlying signification is, however, different as our ratings are relative to the sector.
45% of the companies covered by Exane BNP Paribas were rated Outperform. During the last 12 months, Exane acted as underwriter and/or distributor for BNP
Paribas on 6% of the companies with this rating for which BNP Paribas acted as manager or co-manager in an offering of equity securities. BNP Paribas provided
investment banking services to 72% of the companies accorded this rating*.
39% of the companies covered by Exane BNP Paribas were rated Neutral. During the last 12 months, Exane acted as underwriter and/or distributor for BNP
Paribas on 5% of the companies with this rating for which BNP Paribas acted as manager or co-manager in an offering of equity securities. BNP Paribas provided
investment banking services to 68% of the companies accorded this rating*.
16% of the companies covered by Exane BNP Paribas were rated Underperform. During the last 12 months, Exane acted as underwriter and/or distributor for
BNP Paribas on 3% of the companies with this rating for which BNP Paribas acted as manager or co-manager in an offering of equity securities. BNP Paribas
provided investment banking services to 60% of the companies accorded this rating*.
* Exane is independent from BNP Paribas. Nevertheless, in order to maintain absolute transparency, we include in this category transactions carried out by BNP
Paribas independently from Exane. For the purpose of clarity, we have excluded fixed income transactions carried out by BNP Paribas.

Price and Ratings Chart
Deutsche Post DHL

Historical closing price & target price (as of 06/04/2021)
Source: Exane BNP Paribas
Historical rating & target price changes

Date & Time of
Rating Target Price Closing Price Key changes Report and analyst covering the stock
dissemination (UTC)
11 Jan. 2021 06:06 + EUR41.00 EUR40.95 GLOBAL TRADE TRACKER: $2,000: The Price of Container Paradise? (R. Joynson)
6 Jan. 2021 05:47 + EUR41.00 EUR40.12 FREIGHT FORWARDING: GP/TEU: Will strong freight rates hurt? (R. Joynson)
13 Jul. 2020 05:09 + EUR41.00 EUR34.45 DSV VS. DEUTSCHE POST DHL: Only one winner in Q2? (R. Joynson)
8 Jul. 2020 15:41 + EUR41.00 EUR33.95 INVESTMENT LISTS: Cyclicality over Value (R. Joynson)
19 Jun. 2020 05:29 + EUR41.00 EUR31.10 22ND EUROPEAN CEO CONFERENCE: Conference Feedback (R. Joynson)
10 Jun. 2020 05:21 + EUR41.00 EUR31.03 22ND EUROPEAN CEO CONFERENCE: Day 2 - Tweets and Quotes (R. Joynson)
4 Jun. 2020 04:43 + EUR41.00 EUR30.69 22ND EUROPEAN CEO CONFERENCE: Conference Guide (R. Joynson)
18 May 2020 04:44 + EUR41.00 EUR27.96 Cross Sector: One for the Kidz (R. Joynson)
15 May 2020 05:03 + EUR41.00 EUR26.90 GLOBAL TRADE OUTLOOK: Airfreight: don't rely on a swift rebound (R. Joynson)
12 May 2020 09:02 + EUR41.00 EUR27.56 DEUTSCHE POST DHL: Incremental positives from Q1 release (R. Joynson)
... ... ... ... ... ... ...
30 Nov. 2016 17:00 = EUR31.00 EUR29.49 Initiation of coverage FREIGHT TRANSPORT: I saw three ships... (R. Joynson)
FedEx
Not Available for FedEx
UPS
Not Available for UPS
The latest company-specific disclosures, valuation methodologies and investment case risks for all other companies covered by this document are
available on http://cube.exane.com/compliance.

All Exane research documents are available to all clients simultaneously on the Exane website (http://cube.exane.com). Most published research is also
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Important notice: Please refer to our complete disclosure notice and conflict of interest policy available on http://cube.exane.com/compliance
This research is produced by one or more of EXANE SA (including Exane SA branches, based in the United Kingdom, in the European Economic Area and
in Switzerland) and Exane Inc (collectively referred to as “EXANE"). EXANE SA is authorized by the Autorité de Contrôle Prudentiel et de Résolution and
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Authority COBS 12.2.3R and associated guidance, of article 313-20 of the AMF Règlement Général, and of FINRA Rule 2241, Exane’s policy for
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investment research. This code of conduct is available on Exane’s web site (http://cube.exane.com).
This research is solely for the private information of the recipients. All information contained in this research report has been compiled from sources
believed to be reliable. However, no representation or warranty, express or implied, is made with respect to the completeness or accuracy of its contents,
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EQUITIES

Good things don’t last forever

WHY YOU SHOULD READ THIS REPORT

We initiate on FDX and UPS, with our analysis suggesting

That’s not great news for UPS or FedEx, which we launch

Good things don’t last forever

Deutsche Post DHL (+) FedEx (=) UPS (-)

Inside the Integrators ______________________________________ 3

Investment summary ______________________________________ 4

Volume drivers ___________________________________________ 9

Volume outlook _________________________________________ 18

Competition outlook ______________________________________ 19

Lessons from Europe _____________________________________ 27

Earnings outlook ________________________________________ 29

Volume outlook: US ______________________________________ 34

Competition outlook: US __________________________________ 39

Volume outlook: ex-US ___________________________________ 42

Competition outlook: ex-US ________________________________ 46

Earnings outlook ________________________________________ 58

DEUTSCHE POST DHL __________________________________ 76

Investment case, valuation and risks _________________________ 85

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 2

Figure 1: Global Integrators: Valuation and recommendation summary

Figure 2: Overview of EBIT composition by business activity

65% Supply Chain & Freight

Source: Company data, Exane BNP Paribas estimates

Figure 3: The differentiated work we have done on the key debates

Source: Exane BNP Paribas

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 3

Volumes may disappoint as Covid restrictions are eased – most notably

Figure 4: US and UK online sales as % of Total retail sales excluding automotive

Source: UK government, US Census Bureau, Exane BNP Paribas estimates

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 4

Figure 5: YoY change in International import volumes handled by FedEx/UPS at

In US Domestic, our analysis suggests clear risks from Amazon

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 5

Figure 7: Footprint of newly opened Amazon Logistics facilities in the United

Source: Industry data, Exane BNP Paribas estimates

Deutsche Post provides the best exposure at the lowest price

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 6

Actual vs. weighted

Weighted Actual Difference Average Current

Source: Exane BNP Paribas estimates based on Datastream data

Figure 9: DHL Express and DHL eCommerce implied EV/EBIT (12m-forward),

Source: Exane BNP Paribas estimates based on Datastream data

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 7

Figure 10: Overview of EBNPP forecasts vs. consensus

EBIT Net income DPS

…which we consider pertinent given the point in the cycle

ISM, 3-month lag

Source: Datastream, Exane BNP Paribas estimates

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 8

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 9

Figure 12: Global parcel volume, 2013 to 2019

Asia North America Europe Asia North America Europe

Source: Industry data, Exane BNP Paribas estimates

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 10

2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Company data, Exane BNP Paribas estimates

Exane BNP Paribas Research Global Integrators 7 APRIL 2021 page 11