Despite reporting favorable results for its fiscal fourth quarter after-market hours on Wednesday, FedEx FDX stock fell 3% in today’s trading session. The slide carried over to its primary competitor, with UPS UPS shares dipping 1%.
This comes as FedEx declined to give guidance for its upcoming fiscal year, citing volatile global demand and uncertainty around U.S.-China trade policies. Notably, UPS will be reporting its Q2 results later next month on July 22, and has been affected by similar tariff headwinds, which have disrupted cross-border shipping.
FedEx’s Q4 Results
Able to exceed quarterly expectations, FedEx’s Q4 earnings increased 12% to $6.07 per share and topped EPS estimates of $5.93. This came on Q4 sales of $22.22 billion, which topped estimates of $21.73 billion and was slightly up from $22.1 billion in the comparative quarter. Still, FedEx has missed the Zack EPS Consensus in two of its last four quarterly reports, with an average EPS surprise of -5.53%.
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UPS Q2 Expectations
Based on Zacks' estimates, UPS’s Q2 sales are expected to dip 4% to $20.84 billion versus $21.82 billion a year ago. Zacks' projections call for UPS’s Q2 EPS to fall 12% to $1.57 from $1.79 a share in the prior year quarter. Notably, UPS most recently topped the Zacks EPS Consensus by 3% in April, with Q1 earnings at $1.49 a share compared to expectations of $1.44. UPS has exceeded earnings expectations in three of its last four quarterly reports with an average EPS surprise of 2.42%.
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Performance & Valuation Comparison
Drawing attention as buy-the-dip targets, FedEx and UPS stock are now down 20% this year. Eyeing a longer view, when including dividends, FDX has a total return of +86% over the last five years to noticeably outperform UPS at +11%, although both have trailed the S&P 500’s +120%.
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Optimistically, despite underperforming the broader market, FDX and UPS offer nice discounts in terms of P/E valuation at 11.7X and 14.2X forward earnings, respectively. (S&P 500 is at 23.5X)
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FDX & UPS Dividend Comparison
While FedEx’s total return has trumped UPS, UPS currently has a superior annual dividend yield of 6.52% which towers over FedEx’s 2.41% and the S&P 500’s average of 1.22%.
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Bottom Line
As potential buy-the-dip targets, FedEx and UPS stock are very appealing in terms of value. That said, both land a Zacks Rank #3 (Hold) at the moment, as better buying opportunities may still be ahead considering the tariff headwinds they are facing. Betting on their long-term stock performance, FedEx may be the better pick, but UPS’s enticing dividend is hard to ignore.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
