UPS vs. FDX: Which Parcel Delivery Giant Offers Greater Potential Now?

United Parcel Service UPS and FedEx FDX, with market capitalizations of $99.03 billion and $91.34 billion, respectively, are leading players in the Zacks Transportation — Air Freight and Cargo industry. These well-established companies are synonymous with parcel delivery and logistics.

Delivery trucks from both companies have become a common sight, reflecting their dominance in handling the bulk of parcel shipments. With that backdrop, let’s take a closer look at their financial performance, growth prospects and ongoing challenges. As a result, let's find out which transportation heavyweight might be the smarter investment for now.

The Case for UPS

UPS has been facing prolonged revenue pressure, as geopolitical instability and persistent inflation continue to dampen consumer confidence and economic growth expectations. Uncertainty related to tariffs has further intensified these challenges.

U.S. average daily volumes declined 8.6% in 2025. According to CEO Carol Tomé, the drop in domestic volumes was primarily due to the planned reduction in Amazon AMZN shipments and a deliberate pullback from lower-margin e-commerce volumes.

Last year, UPS reached an agreement in principle with Amazon to reduce shipment volumes by more than 50% by June 2026. Management has noted that Amazon was not among its most profitable customers. UPS aims to trim its workforce to reduce the number of Amazon deliveries.

The company has shifted its focus to higher-margin areas such as small and medium-sized businesses and healthcare logistics from low-margin volumes like Amazon. As part of the restructuring and cost-cutting efforts, UPS announced on the fourth-quarter 2025 conference call that it would eliminate up to 30,000 operational jobs and close multiple facilities by 2026. This move aims to reduce reliance on Amazon deliveries and pivot toward more profitable business endeavors.

UPS, which closed 93 buildings in 2025, has already selected 24 buildings for closure. These buildings will close in the first half of 2026. More buildings are likely to be closed later in the year.

Global trade challenges are also hurting UPS, mainly its international segment. As evidence, average daily volumes plummeted 30.5% from Canada and Mexico in the final quarter of 2025. Trade volumes declined 20.9% in the China-U.S. trade lane.

The De Minimis exemption expired last year. The trade exemption allowed packages containing goods valued at less than $800 to enter the United States without additional taxes. This development hurt the International segment volumes in the fourth quarter by diverting volumes away from the China-U.S. trade lane.

Moreover, UPS’ dividend payout ratio stands at 92, raising questions about its long-term ability to maintain current dividend levels. The company’s elevated dividend payout is hurting its operational flexibility.

The Case for FDX

FedEx is also looking to Cut Costs to drive the bottom line in the face of revenue weakness. The company is realigning its costs under a companywide initiative called DRIVE. Driven by the initiatives (that include reducing flight frequencies, parking aircraft and cutting staff), FDX reported a double-digit year-over-year increase in its fiscal second-quarter earnings.

The DRIVE program resulted in $1.8 billion in permanent savings in fiscal 2024. The program resulted in $2.2 billion in cost savings in fiscal 2025. For fiscal 2026, management expects to achieve $1 billion of transformation-related savings, which includes DRIVE and Network2.0. 

Despite ongoing headwinds, FedEx benefits from a strong brand and an extensive logistics network capable of generating stable long-term cash flows. Strategic investments continue to enhance the service offerings and strengthen its competitive position.

FedEx intends to spin off its struggling Freight division. In the first half of fiscal 2026, segment revenues fell 2% year over year, as continued weakness in U.S. industrial production dampened demand across the less-than-truckload industry. The spinoff is slated for completion on June 1, 2026. Upon completion, FedEx Freight will operate as an independently traded public company on the New York Stock Exchange under the ticker symbol FDXF. The separation is expected to enable FDX to unlock a premium valuation for its Freight business, comparable to the leading players in the less-than-truckload space.

FDX’s dividend payout ratio currently stands at 30%, much lower than UPS’. So FDX, unlike UPS, does not face concerns about its long-term ability to maintain current dividend levels.

Taking a Look at the Two Companies’ Price Performance and Valuation

In a year, UPS’ shares have gained marginally. On the other hand, FDX’s shares have performed much better, gaining in double digits in the same time frame.

One-Year Price Comparison

Image Source: Zacks Investment Research

UPS is trading at a forward sales multiple of 1.1X, whereas FDX’s forward sales multiple sits at 0.96X, suggesting that the former’s shares are pricier.

Image Source: Zacks Investment Research

Leverage Comparison

FDX’s lower debt-to-capital ratio implies that it relies less on debt financing and has a stronger equity position.

End Note

Both FedEx and UPS continue to experience revenue pressure amid sluggish demand conditions. To navigate the challenging environment, each company is pursuing cost-reduction initiatives, though their approaches differ. UPS is prioritizing automation and robotics to improve operational efficiency and lessen reliance on Amazon, while FedEx has undertaken a major restructuring of its Ground and Services segments.

From a valuation standpoint, FDX appears more attractive than UPS. FedEx has also delivered relatively stronger stock price performance. Moreover, despite its cost-cutting efforts, UPS’ earnings are expected to contract 5.1% over the next five years, whereas FedEx's earnings are projected to achieve a growth rate of 11.3%. FedEx also maintains an edge over UPS in terms of financial leverage.

Taking all these factors into account, FDX, currently carrying a Zacks Rank #2 (Buy), appears to be the more compelling choice than UPS, which has a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. 

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This article originally published on Zacks Investment Research (zacks.com).

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