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UPS vs. FDX: Which Parcel Delivery Company Has an Edge Now?
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Key Takeaways
FDX saved $2.2B in fiscal 2025 via its DRIVE plan and targets $1B more in cost cuts for fiscal 2026.
UPS plans to cut 20,000 jobs and reduce Amazon volume by 50% to control costs and boost profitability.
FDX outperforms UPS in YTD stock performance, valuation metrics and projected long-term earnings growth.
United Parcel Service (UPS - Free Report) and FedEx (FDX - Free Report) are two well-known global package delivery companies. Both these heavyweights offer a wide range of shipping services, including domestic and international options, express and ground shipping and logistics solutions. While FDX is based in Memphis, TN, UPS is headquartered in Atlanta.
They dominate and define the Zacks Transportation—Air Freight and Cargo industry, accounting for the vast majority of parcels delivered. Given this backdrop, let's examine these companies closely to determine which currently holds the edge, and more importantly, which might be the smarter investment now.
The Case for FDX
FedEx, which is known for its speed and expertise in international and express air freight, is looking to cut costs to combat the weakness in package volumes. Geopolitical uncertainty, tariff woes and high inflation continue to hurt consumer sentiment and growth expectations.
Due to the prevailing uncertainty, the shipping giant shelved its revenue and earnings forecast for fiscal 2026 (ending May 31, 2026) while releasing its fourth-quarter fiscal 2025 results last month. Previously, FDX had lowered its fiscal 2025 outlook for three quarters in a row due to macroeconomic woes.
FDX is cutting costs mainly through its DRIVE initiatives, which resulted in savings worth $2.2 billion in fiscal 2025 and $1.8 billion in fiscal 2024. The cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. The DRIVE program refers to a comprehensive program to improve the company’s long-term profitability. For fiscal 2026, management expects to achieve $1 billion of transformation-related savings, which includes DRIVE and Network 2.0.
The company’s efforts to reward its shareholders are commendable. In June 2025, FedEx announced a 5.1% hike in its quarterly dividend to $1.45 per share (or $5.80 annually). FDX is also active on the buyback front. FDX has repurchased shares worth $3 billion in fiscal 2025. FDX returned $4.3 billion to shareholders in fiscal 2025 through dividends and buybacks, exceeding the target of $3.8 billion. Despite near-term tariff-induced challenges, it’s worth noting that the company has the brand and the network to continue generating steady cash flows in the long run. FDX’s endeavors to expand its operations are commendable. Prudent investments enable FDX to extend its services and solidify comprehensive offerings.
FedEx's liquidity position is solid. The company's current ratio, a measure of liquidity, was pegged at 1.19 at the end of fiscal 2025. A current ratio of more than 1 indicates that the company's assets will be able to cover its short-term obligations that fall due before the end of the year. The reading also compares favorably with its industry's reading.
The Case for UPS
UPS, which is well known for its robust domestic ground network, offering reliable and cost-effective ground shipping services, is also being hurt by the weak demand scenario due to the economic uncertainty. This has led to a decline in the volume of packages shipped.
In addition to softness concerning parcel volumes, high labor costs are also hurting its operations. Faced with these headwinds, the company is focusing on cutting costs. As part of this exercise, UPS is offering buyouts to delivery drivers for the first time in its 117-year history. UPS’ full-time drivers are eligible for this offer.
The company reportedly aims to trim its workforce by 20,000 this year, representing approximately 4% of the global workforce and shut 73 facilities to streamline operations and lower labor costs. Notably, expenses on compensation and benefits increased 2.1% year over year in 2024. The same is expected to decrease 2.6% in 2025 from 2024 levels, as per our model.
Apart from the tariff-induced economic uncertainties, UPS’ decision to reduce business with its largest customer, Amazon (AMZN - Free Report) , contributed to the decision to trim the workforce. UPS management has reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to Carol Tome, UPS’ chief executive officer, Amazon was not its most profitable customer.
In February, UPS management announced a 0.6% hike in its quarterly dividend payout to $1.64 per share (annualized $6.56 per share). No doubt this represents UPS’ shareholder-friendly approach, but questions about the sustainability of its dividend arise. United Parcel Service’s elevated dividend payout ratio (the percentage of net income paid out as dividends) of 84% highlights the concern associated with its ability to maintain dividend payouts over the long term. Currently, UPS' elevated dividend payout is hurting its operational flexibility, with free cash flow barely covering the dividend.
UPS' financial metrics indicate that its leverage is elevated and is a massive negative for its shareholders. The long-term debt burden of the company was $19.5 billion at the end of the first quarter of 2025, which translates into a long-term debt-to-capitalization of 55.4%, above the sub-industry’s 49.2%. The reading for FDX is also much lower at 40.5%.
UPS’ efforts to expand its presence are encouraging. The company has inked many deals in this regard. E-commerce demand strength should continue to support the growth of transportation players like UPS.
A Look at FDX and UPS’ Price Performance & Valuation
So far this year, UPS shares have plunged 18.8%, underperforming the industry. On the other hand, FDX shares have performed comparatively better, declining 15.2% year to date and outperforming its industry.
YTD Price Comparison
Image Source: Zacks Investment Research
In terms of price to earnings ratio, UPS is trading at a forward earnings multiple of 13.66, above its industry’s reading of 13.06. FDX’s forward earnings multiple sits at 12.76. So, UPS appears to be pricier than FDX. FDX has a Value Score of A, while UPS has a Value Score of B.
UPS’ P/E F12M Vs. FDX & Industry
Image Source: Zacks Investment Research
How Do Estimates Compare for UPS & FDX?
The Zacks Consensus Estimate for UPS’ 2025 sales implies a year-over-year decline of 4.2%, while the consensus mark for earnings indicates a steeper 9.2% fall. The Zacks Consensus Estimate for UPS’ 2026 sales implies year-over-year growth of 0.6%, while the consensus mark for earnings indicates 13.1% growth. EPS estimates for 2025 and 2026 have been trending southward over the past 60 days.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for FDX’s fiscal 2026 revenues indicates a 1.6% year-over-year increase, while the consensus mark for earnings indicates 1.3% growth. The Zacks Consensus Estimate for FDX’s fiscal 2027 sales and earnings indicates 4.1% and 13.6% growth, respectively, year over year. EPS estimates for fiscal 2026 and 2027 have been trending southward over the past 60 days.
Image Source: Zacks Investment Research
End Note
Both FDX and UPS are facing revenue pressure due to a weak demand scenario. New union negotiations and a decline in the volume of packages shipped are common concerns. Both these heavyweights are looking to drive growth in the face of weak demand by cutting costs. However, their approach differs. UPS is investing in automation and robotics to improve efficiency, apart from reducing its reliance on Amazon.com. On the other hand, FedEx has undergone a major restructuring and is completing a long-term cost-saving program.
FDX appears to be more attractive than UPS from a valuation standpoint. FDX also scores over UPS in terms of price performance. Moreover, while UPS’ earnings are projected to grow 7.4% over the next five years, the reading is higher for FDX at 10.4%. FDX also scores over UPS in terms of financial leverage. Given these factors, FDX seems a better pick than UPS now.
While FDX carries a Zacks Rank #3 (Hold), UPS is currently #4 Ranked (Sell).
Image: Bigstock
UPS vs. FDX: Which Parcel Delivery Company Has an Edge Now?
Key Takeaways
United Parcel Service (UPS - Free Report) and FedEx (FDX - Free Report) are two well-known global package delivery companies. Both these heavyweights offer a wide range of shipping services, including domestic and international options, express and ground shipping and logistics solutions. While FDX is based in Memphis, TN, UPS is headquartered in Atlanta.
They dominate and define the Zacks Transportation—Air Freight and Cargo industry, accounting for the vast majority of parcels delivered. Given this backdrop, let's examine these companies closely to determine which currently holds the edge, and more importantly, which might be the smarter investment now.
The Case for FDX
FedEx, which is known for its speed and expertise in international and express air freight, is looking to cut costs to combat the weakness in package volumes. Geopolitical uncertainty, tariff woes and high inflation continue to hurt consumer sentiment and growth expectations.
Due to the prevailing uncertainty, the shipping giant shelved its revenue and earnings forecast for fiscal 2026 (ending May 31, 2026) while releasing its fourth-quarter fiscal 2025 results last month. Previously, FDX had lowered its fiscal 2025 outlook for three quarters in a row due to macroeconomic woes.
FDX is cutting costs mainly through its DRIVE initiatives, which resulted in savings worth $2.2 billion in fiscal 2025 and $1.8 billion in fiscal 2024. The cost-reduction initiatives include reducing flight frequencies, parking aircraft and cutting staff. The DRIVE program refers to a comprehensive program to improve the company’s long-term profitability. For fiscal 2026, management expects to achieve $1 billion of transformation-related savings, which includes DRIVE and Network 2.0.
The company’s efforts to reward its shareholders are commendable. In June 2025, FedEx announced a 5.1% hike in its quarterly dividend to $1.45 per share (or $5.80 annually). FDX is also active on the buyback front. FDX has repurchased shares worth $3 billion in fiscal 2025. FDX returned $4.3 billion to shareholders in fiscal 2025 through dividends and buybacks, exceeding the target of $3.8 billion. Despite near-term tariff-induced challenges, it’s worth noting that the company has the brand and the network to continue generating steady cash flows in the long run. FDX’s endeavors to expand its operations are commendable. Prudent investments enable FDX to extend its services and solidify comprehensive offerings.
FedEx's liquidity position is solid. The company's current ratio, a measure of liquidity, was pegged at 1.19 at the end of fiscal 2025. A current ratio of more than 1 indicates that the company's assets will be able to cover its short-term obligations that fall due before the end of the year. The reading also compares favorably with its industry's reading.
The Case for UPS
UPS, which is well known for its robust domestic ground network, offering reliable and cost-effective ground shipping services, is also being hurt by the weak demand scenario due to the economic uncertainty. This has led to a decline in the volume of packages shipped.
In addition to softness concerning parcel volumes, high labor costs are also hurting its operations. Faced with these headwinds, the company is focusing on cutting costs. As part of this exercise, UPS is offering buyouts to delivery drivers for the first time in its 117-year history. UPS’ full-time drivers are eligible for this offer.
The company reportedly aims to trim its workforce by 20,000 this year, representing approximately 4% of the global workforce and shut 73 facilities to streamline operations and lower labor costs. Notably, expenses on compensation and benefits increased 2.1% year over year in 2024. The same is expected to decrease 2.6% in 2025 from 2024 levels, as per our model.
Apart from the tariff-induced economic uncertainties, UPS’ decision to reduce business with its largest customer, Amazon (AMZN - Free Report) , contributed to the decision to trim the workforce. UPS management has reached an agreement in principle with Amazon to lower the latter’s volume by more than 50% by June 2026. According to Carol Tome, UPS’ chief executive officer, Amazon was not its most profitable customer.
In February, UPS management announced a 0.6% hike in its quarterly dividend payout to $1.64 per share (annualized $6.56 per share). No doubt this represents UPS’ shareholder-friendly approach, but questions about the sustainability of its dividend arise. United Parcel Service’s elevated dividend payout ratio (the percentage of net income paid out as dividends) of 84% highlights the concern associated with its ability to maintain dividend payouts over the long term. Currently, UPS' elevated dividend payout is hurting its operational flexibility, with free cash flow barely covering the dividend.
UPS' financial metrics indicate that its leverage is elevated and is a massive negative for its shareholders. The long-term debt burden of the company was $19.5 billion at the end of the first quarter of 2025, which translates into a long-term debt-to-capitalization of 55.4%, above the sub-industry’s 49.2%. The reading for FDX is also much lower at 40.5%.
UPS’ efforts to expand its presence are encouraging. The company has inked many deals in this regard. E-commerce demand strength should continue to support the growth of transportation players like UPS.
A Look at FDX and UPS’ Price Performance & Valuation
So far this year, UPS shares have plunged 18.8%, underperforming the industry. On the other hand, FDX shares have performed comparatively better, declining 15.2% year to date and outperforming its industry.
YTD Price Comparison
In terms of price to earnings ratio, UPS is trading at a forward earnings multiple of 13.66, above its industry’s reading of 13.06. FDX’s forward earnings multiple sits at 12.76. So, UPS appears to be pricier than FDX. FDX has a Value Score of A, while UPS has a Value Score of B.
UPS’ P/E F12M Vs. FDX & Industry
How Do Estimates Compare for UPS & FDX?
The Zacks Consensus Estimate for UPS’ 2025 sales implies a year-over-year decline of 4.2%, while the consensus mark for earnings indicates a steeper 9.2% fall. The Zacks Consensus Estimate for UPS’ 2026 sales implies year-over-year growth of 0.6%, while the consensus mark for earnings indicates 13.1% growth. EPS estimates for 2025 and 2026 have been trending southward over the past 60 days.
The Zacks Consensus Estimate for FDX’s fiscal 2026 revenues indicates a 1.6% year-over-year increase, while the consensus mark for earnings indicates 1.3% growth. The Zacks Consensus Estimate for FDX’s fiscal 2027 sales and earnings indicates 4.1% and 13.6% growth, respectively, year over year. EPS estimates for fiscal 2026 and 2027 have been trending southward over the past 60 days.
End Note
Both FDX and UPS are facing revenue pressure due to a weak demand scenario. New union negotiations and a decline in the volume of packages shipped are common concerns. Both these heavyweights are looking to drive growth in the face of weak demand by cutting costs. However, their approach differs. UPS is investing in automation and robotics to improve efficiency, apart from reducing its reliance on Amazon.com. On the other hand, FedEx has undergone a major restructuring and is completing a long-term cost-saving program.
FDX appears to be more attractive than UPS from a valuation standpoint. FDX also scores over UPS in terms of price performance. Moreover, while UPS’ earnings are projected to grow 7.4% over the next five years, the reading is higher for FDX at 10.4%. FDX also scores over UPS in terms of financial leverage. Given these factors, FDX seems a better pick than UPS now.
While FDX carries a Zacks Rank #3 (Hold), UPS is currently #4 Ranked (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here