UPS vs. FedEx: Which Stock Is the Better Buy After Strong Q3 Results?

Shipping giants United Parcel Service UPS) and FedEx FDX) are drawing investors' attention after both companies delivered better-than-expected quarterly results this week and raised their financial outlooks.

UPS stock has surged 13% this month, with FDX rising more than 7% amid improving earnings prospects and increased optimism surrounding the holiday shipping season.

With both companies benefiting from cost-cutting initiatives and improving operational efficiency, which stock offers the better combination of growth, value, and dividend income?

UPS vs FedEx: Q3 Results & Raised Guidance

UPS reported Q3 adjusted earnings of $1.69 per share, beating expectations of $1.63 by nearly 4% but declining from $1.74 in the year-ago quarter, which benefited from a one-time $0.30-per-share gain from a sale-leaseback transaction.

Still, UPS’s Q3 revenue increased roughly 7% year over year to $22.85 billion and exceeded estimates of $22.25 billion.

Encouragingly, UPS raised its full-year revenue outlook to $92.6 billion from $91.2 billion and increased its adjusted EPS guidance to $7.28 per share, up from $7.22 previously. The company also lifted its free cash flow target to $6.1 billion, reflecting improving network efficiency and profitability.

Meanwhile, FedEx posted Q3 adjusted EPS of $3.74, easily surpassing expectations of $3.24 by 15% and increasing 28% from $2.93 a year ago, excluding the impact of its FedEx Freight spin-off.

Revenue from continued operations jumped 12% to $22.85 billion and surpassed estimates of $22.33 billion, supported by higher shipping volumes, improved pricing, and cost reductions.

FedEx also raised its fiscal 2026 adjusted EPS guidance to $18.00-$18.60, compared with its previous forecast of $16.90-$18.10. Furthermore, management now expects revenue growth of approximately 12%, up from its previous forecast of 11%.

Stock Performance & Valuation Comparison

FedEx has delivered stronger longer-term share-price performance, gaining 24% over the past year compared with UPS's 12% advance.

FDX has gained a respectable 30% over the last three years, trailing the S&P 500 but far outpacing UPS's 23% decline. UPS's underperformance reflects a combination of post-pandemic shipping volume declines, restructuring costs, and greater vulnerability to broader macroeconomic headwinds.

While FedEx has shown stronger momentum, UPS offers the more attractive valuation, trading near 13X forward earnings compared with 15X for FDX, although both trade at attractive discounts to the benchmark S&P 500.

Trading around $106 a share, UPS's discounted valuation could offer greater upside if its restructuring initiatives generate sustainable earnings growth. However, at over $300 a share, FedEx's accelerating revenue and earnings growth may still justify its modest valuation premium.

UPS & FDX Dividend Comparison

Despite its underperformance in recent years, UPS has a significant advantage for income-oriented investors, offering an annual dividend of $6.56 per share and a compelling 6.2% yield.

While UPS offers nearly four times the dividend yield of FedEx, its annual payout represents over 90% of management's projected 2026 adjusted EPS, raising questions about future dividend growth and sustainability.

In comparison, FedEx currently pays $4.88 annually, yielding approximately 1.6%.

That said, FedEx offers a more conservative payout ratio that is under 30%, offering greater flexibility to return capital through share repurchases, including $2 billion in buybacks completed between June and September.

Conclusion & Strategic Thoughts

Both UPS and FedEx appear attractive following their upbeat quarterly results and improved financial guidance.

UPS may be the better choice for value and income investors, given its cheaper forward earnings multiple and substantially higher dividend yield. Conversely, FedEx looks more appealing for growth-oriented investors, supported by faster revenue growth, stronger earnings momentum, and its ongoing transformation initiatives.

For now, both stocks land a Zacks Rank #3 (Hold) following their sharp rallies, with further upside potentially hinging on upward revisions to FY27 earnings estimates after their strong Q3 results.

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

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