Set to report its Q1 results on Tuesday, April 28, UPS UPS) will provide another glimpse of critical insight into how shipping and logistics companies are moving past tariffs.
Optimistically, FedEx FDX) recently reported strong results for its fiscal third quarter that revealed improved pricing and stronger demand in high-margin services like international priority shipping. This is despite the suspension of the de minimus exemption still being in effect under the Trump administration, which previously allowed imports valued under $800 to enter the country duty-free.
Nonetheless, FedEx's report echoed that it was moving past fears of lower international shipping and saw strength in domestic package shipping as well.
Wall Street will be watching to see if UPS is able to show these same improvements, with it noteworthy that FedEx exceeded top and bottom line expectations last month and raised its full-year guidance.
How UPS’s Q1 Expectations Compare to FedEx Results
Based on Zacks estimates, UPS’s Q1 sales are expected to dip 2% year over year to $21.08 billion. On the bottom line, UPS’s Q1 earnings are thought to have fallen 28% to $1.06 per share, versus EPS of $1.49 in the prior year quarter.
In comparison, FedEx’s quarterly sales were up 8% YoY to $24 billion while EPS spiked 16% to $5.25. These figures beat sales and EPS expectations by 1.75% and 26.81%, respectively.
Strong Momentum for UPS & FDX
Gaining strong momentum since crushing earnings expectations, FedEx stock is up 10% in the last month, with UPS shares rising 8% and recovering a small loss earlier in the year. In contrast, FedEx stock is now sitting on year-to-date gains of +30%, with UPS shares up a modest 9%.
FedEx’s prolonged momentum comes as it has been less exposed to tariff impacts than UPS. Although both carriers face similar tariff environments, UPS tends to feel the effects more directly because it acts as an Importer of Record (IOR) more often and handles a larger share of low-value e-commerce parcels that were hit hardest by recent tariffs and de minimis changes.
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The Choice Between UPS & FedEx Stock
While FedEx has started to deliver a more promising return to growth, the argument for UPS remains rooted in value.
The Zacks Consensus now calls for FedEx’s annual sales and EPS to increase over 6% this year, respectively, with estimates at $93.26 billion and $19.61 per share.
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As for UPS, FY26 sales are projected to be up 1% to $89.28 billion, but full-year EPS is expected to fall 1% to $7.06.
Still, UPS is trading at a sharper discount to the benchmark S&P 500 at 15X forward earnings, with FDX at 19X. It’s noteworthy that UPS and FDX both trade at around 1X forward sales, with the S&P 500 at nearly 5X.
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However, UPS’s 6.13% annual dividend yield further bolsters its value, which towers over FedEx’s 1.5% and the S&P 500’s average of 1.05%.
It’s worth noting that while UPS appears committed to maintaining its high yield, its payout ratio has climbed above 90%, as shrinking profits and pressured free cash flow mean most of its earnings are now being consumed by its lofty dividend.
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Conclusion & Final Thoughts
At the moment, UPS and FedEx stock both land a Zacks Rank #3 (Hold). There could be better buying opportunities ahead for these prominent transportation sector stocks, but FedEx has offered more long-term upside as it moves past tariff disruptions, considering its return to growth.
UPS’s Q1 results and guidance will be crucial to hopefully showing the ability to do the same while supporting its more appealing argument for value, especially as it relates to the likelihood of sustaining its enticing dividend yield.
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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.
