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Zacks Investment Ideas feature highlights: FedEx and United Parcel Service
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For Immediate Release
Chicago, IL – September 22, 2023 – Today, Zacks Investment Ideas feature highlights FedEx (FDX - Free Report) and United Parcel Service (UPS - Free Report) .
FedEx vs. UPS: Which Is the Better Buy?
FedEx, a leader in global express delivery services, reported quarterly results yesterday after the market's close. It's one of the earlier reports we'll count in our Q3 tally, with others such as Auto Zone and General Mills also reporting in recent days.
FedEx exceeded the Zacks Consensus Estimate by nearly 23% and posted year-over-year growth of more than 30%, with lower operating expenses helping drive the improvement. Quarterly revenue totaled $21.7 billion, a tick below expectations and slipping 6% from the year-ago period.
Operating income climbed 25% from the year-ago period, with cost reductions and other key initiatives providing meaningful tailwinds. Still, it's worth noting that the company has touched on ongoing demand weakness, which negatively impacted the quarter's results.
The company's DRIVE program has also been delivering benefits and is expected to continue; FedEx expects permanent cost reductions of $1.8 billion from the transformative program, again helping offset recent demand weakness and deliver improved profitability.
The market reacted highly favorably to the print, with FDX shares seeing notable buying pressure following the release. A peer, United Parcel Service, also saw modest buying pressure in response to the results.
Given the better-than-expected print, it raises a valid question – which company, FedEx or United Parcel Service, currently looks like a better buy? Let's take a closer look at a few characteristics of each.
FedEx vs. United Parcel Service
UPS, a current Zacks Rank #4 (Sell), has seen its near-term earnings outlook shift negatively across all timeframes, with analysts in full agreement. On the contrary, FedEx is a current Zacks Rank #3 (Hold), with positive revisions hitting the tape for its current and next fiscal years.
And when it comes to growth, FedEx is the clear winner – FDX's earnings are forecasted to climb 16% in its current year (FY24) and an additional 22% in FY25, whereas United Parcel Service's earnings are forecasted to take a 27% hit in its current year before returning back to growth in FY24.
Regarding valuation, FDX's current 14.4X forward earnings multiple is beneath UPS' current 16.7X, with both values residing below their respective five-year medians. FDX sports a Style Score of "A" for Value, whereas UPS carries a "B."
FedEx has also been more consistent with its quarterly results, exceeding the Zacks Consensus EPS Estimate by an average of 17% across its last four releases compared to UPS' 2%.
As shown below, better-than-expected quarterly results have driven FDX's outperformance in 2023, regularly boosting shares post-earnings.
Bottom Line
FedEx posted results that impressed the market, with shares gaining roughly 5% following the release. Lowered costs, thanks to successful transformative initiatives, drove the better-than-expected results, with the company's profitability improving nicely.
And when pitting FedEx against UPS, it appears that FDX shares appear to be the better option. UPS has seen its earnings outlook shift negatively over the recent months, hasn't seen positive reactions to quarterly results, and is expected to witness a growth slowdown in its current year.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: FedEx and United Parcel Service
For Immediate Release
Chicago, IL – September 22, 2023 – Today, Zacks Investment Ideas feature highlights FedEx (FDX - Free Report) and United Parcel Service (UPS - Free Report) .
FedEx vs. UPS: Which Is the Better Buy?
FedEx, a leader in global express delivery services, reported quarterly results yesterday after the market's close. It's one of the earlier reports we'll count in our Q3 tally, with others such as Auto Zone and General Mills also reporting in recent days.
FedEx exceeded the Zacks Consensus Estimate by nearly 23% and posted year-over-year growth of more than 30%, with lower operating expenses helping drive the improvement. Quarterly revenue totaled $21.7 billion, a tick below expectations and slipping 6% from the year-ago period.
Operating income climbed 25% from the year-ago period, with cost reductions and other key initiatives providing meaningful tailwinds. Still, it's worth noting that the company has touched on ongoing demand weakness, which negatively impacted the quarter's results.
The company's DRIVE program has also been delivering benefits and is expected to continue; FedEx expects permanent cost reductions of $1.8 billion from the transformative program, again helping offset recent demand weakness and deliver improved profitability.
The market reacted highly favorably to the print, with FDX shares seeing notable buying pressure following the release. A peer, United Parcel Service, also saw modest buying pressure in response to the results.
Given the better-than-expected print, it raises a valid question – which company, FedEx or United Parcel Service, currently looks like a better buy? Let's take a closer look at a few characteristics of each.
FedEx vs. United Parcel Service
UPS, a current Zacks Rank #4 (Sell), has seen its near-term earnings outlook shift negatively across all timeframes, with analysts in full agreement. On the contrary, FedEx is a current Zacks Rank #3 (Hold), with positive revisions hitting the tape for its current and next fiscal years.
And when it comes to growth, FedEx is the clear winner – FDX's earnings are forecasted to climb 16% in its current year (FY24) and an additional 22% in FY25, whereas United Parcel Service's earnings are forecasted to take a 27% hit in its current year before returning back to growth in FY24.
Regarding valuation, FDX's current 14.4X forward earnings multiple is beneath UPS' current 16.7X, with both values residing below their respective five-year medians. FDX sports a Style Score of "A" for Value, whereas UPS carries a "B."
FedEx has also been more consistent with its quarterly results, exceeding the Zacks Consensus EPS Estimate by an average of 17% across its last four releases compared to UPS' 2%.
As shown below, better-than-expected quarterly results have driven FDX's outperformance in 2023, regularly boosting shares post-earnings.
Bottom Line
FedEx posted results that impressed the market, with shares gaining roughly 5% following the release. Lowered costs, thanks to successful transformative initiatives, drove the better-than-expected results, with the company's profitability improving nicely.
And when pitting FedEx against UPS, it appears that FDX shares appear to be the better option. UPS has seen its earnings outlook shift negatively over the recent months, hasn't seen positive reactions to quarterly results, and is expected to witness a growth slowdown in its current year.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.