This earnings season has been filled with excitement as companies report their quarterly results. So far, many companies have exceeded expectations, impressing investors and traders alike. One company getting ready to release its earnings report is United Parcel Service (UPS), and we can look at FedEx’s (FDX) results as a guide for what to expect.
FedEx’s Strong Performance
In 2023, FedEx shares have outperformed UPS shares by a significant margin, with a 40% gain compared to a 9% decline. In its most recent report, FedEx reported adjusted EPS of $4.55, beating the Zacks Consensus Estimate by 23% and showing a 32% improvement year-over-year. However, quarterly revenue came in slightly below expectations, with a 6% decline from the previous year due to soft demand.
Despite the demand weakness, FedEx’s DRIVE program has allowed the company to achieve cost-saving measures, resulting in a substantial bottom-line beat. The program is expected to deliver $4 billion in cost savings for the next fiscal year, with margins projected to expand.
United Parcel Service’s Challenges
United Parcel Service is facing similar challenges with soft demand and decreasing volumes in its U.S. Domestic and International segments. Analysts have revised their earnings expectations downward for the upcoming quarter, reflecting a 46% decline year-over-year. Revenue expectations have also seen negative revisions, with a predicted 11% pullback from the previous year.
Choosing the Better Buy
If UPS reports positive earnings, it could break the current downtrend in its stock price, especially if the company showcases improved profitability like FedEx did. However, in the near term, FedEx seems like the better buy. The company’s positive earnings estimate revisions, driven by successful cost-saving initiatives, support this view. Additionally, FedEx shares are more reasonably priced, with a lower forward 12-month earnings multiple compared to UPS.
In summary, investors looking to make a decision between FedEx and UPS should consider the latest earnings reports and future prospects for each company. While UPS faces challenges with soft demand and declining volumes, FedEx has shown strength in its cost-saving initiatives and improved profitability. Ultimately, investors need to weigh these factors to determine which stock is the better buy for their portfolio.