FedEx Vs UPS: Which Delivery Services Stock is the Better Buy the Dip Target?
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%.
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%.
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%.
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)
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%.
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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