FedEx vs. UPS: Is Either Delivery Stock Still Portfolio Worthy?

FedEx (FDX) is poised to report Q1 results under pressure from tariffs, cross-border shipping weakness, and the recent termination of the de minimis trade exemption, factors that also impacted UPS's performance. While FedEx projects modest Q1 sales and EPS growth, Zacks' ESP indicates a potential earnings miss. Both FDX and UPS have experienced significant stock underperformance over the past five years, with declining EPS estimates for upcoming fiscal years despite trading at a discount to the S&P 500 and their historical forward earnings multiples. Reflecting these challenges and ongoing negative earnings revisions, both companies currently carry a Zacks Rank #4 (Sell), signaling reduced portfolio worthiness for institutional investors.

Analysis

The delivery services sector, represented by FedEx (FDX) and United Parcel Service (UPS), is facing significant fundamental pressure from tariffs, cross-border shipping weakness, and the recent termination of the de minimis trade exemption. This is reflected in their severe stock underperformance over the last five years, with FDX declining 7% and UPS falling 40% while broader indexes gained over 100%. Ahead of its Q1 report, FedEx is expected to post minimal growth, with sales and EPS projected to rise just 1%. However, a Zacks Expected Surprise Prediction (ESP) signals a high probability of an earnings miss, with the most accurate estimate for Q1 EPS at $3.47, 5% below consensus. Looking forward, EPS estimates for both FDX (FY26/27) and UPS (FY25/26) have seen negative revisions in the last 30-60 days. UPS's outlook appears particularly challenged, with sales forecast to dip 4% and earnings to fall 15% in FY25. While both companies trade at a significant valuation discount to the S&P 500 and their own historical medians (around 12x forward earnings), this is overshadowed by deteriorating fundamentals, leading to a Zacks Rank #4 (Sell) for both tickers.

Key Decisions for Investors

• Given the negative earnings revisions and Zacks #4 (Sell) rating for both FDX and UPS, investors should exercise caution and avoid initiating new long positions until there is a clear stabilization or positive inflection in earnings estimates.
• Investors should closely monitor FedEx's upcoming Q1 earnings report, specifically management's guidance on the impact of the de minimis exemption termination, as this will serve as a critical bellwether for the entire logistics sector.
• The 7.81% dividend yield for UPS should be viewed with skepticism, as the company's projected 15% earnings decline and the article's characterization of it as a potential 'value trap' suggest significant underlying business risk.
• For those holding positions, it is crucial to re-evaluate the risk-reward profile, as both stocks require a high risk tolerance and prolonged patience in the current environment of persistent macro headwinds and deteriorating analyst sentiment.