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FedEx Tops UPS in Market Value for First Time
Shift Marks Historic Reversal
Key Takeaways:
- FedEx surpassed UPS in market value for the first time after UPS shares fell sharply amid labor costs and shrinking volume.
- The shift reflects investor skepticism over UPS’ strategy and confidence in FedEx’s cost cuts and freight spinoff plans.
- Both carriers face pressure from rising fuel costs during the Mideast conflict, with investors watching how each adapts to industry and economic headwinds.
FedEx Corp. has eclipsed rival UPS Inc. as the largest U.S. parcel carrier by market value for the first time.
The milestone punctuates a multiyear stock slide for UPS, which has faced pressure from labor costs, declining volume and questions about its relationship with Amazon.com Inc. For FedEx, it’s the latest sign that management has won investors over with plans to trim costs, boost margins and spin off its freight business.
Shares of both firms have underperformed the broader market during the Mideast conflict over the past week or so, amid worries related to rising fuel costs and the potential hit to economic growth.
However, UPS has been hit harder, falling 14% this month, compared with a drop of 6.7% for FedEx. The latter’s market value stood at $84.9 billion as of the March 9 close, just above UPS’ $84.86 billion.
“It is a bit surprising,” Mark Hackett, chief market strategist at Nationwide, said of FedEx’s leapfrog of its rival’s value. “The emergence and eventual dominance of Amazon has turned this industry upside down.”
The shift in market value leadership marks a historic reversal for the two biggest U.S. parcel carriers. Throughout its 119-year history, UPS had been the country’s most valuable package carrier, with its fleet of brown-clad delivery trucks and drivers becoming a fixture for businesses and households alike.
FedEx, by contrast, has largely played the role of challenger since it was founded in 1971 by Fred Smith. Starting with a small fleet of aircraft for dedicated airfreight service, Smith built the company into a global behemoth that pioneered next-day air deliveries, transforming the logistics industry in the process.
Both stocks slumped in the wake of the pandemic, as a boom in e-commerce dissipated and investors feared Amazon would snap up an increasing share of the business. President Donald Trump’s trade war created more headwinds, but FedEx has been far quicker to win back Wall Street’s trust.
Investors were deeply skeptical of UPS’ plan to scale back its business with Amazon, and they’re still not convinced the company will be able to find more profitable ways to make up for it. The courier’s workers won large wage increases in 2023, another source of concern.
FedEx, meanwhile, has gotten a warmer reception for plans to reorganize its European business and spin off the freight unit. Its shares are up 25% this year, even after taking a hit during the war, while UPS is barely in the green. FedEx also commands a premium valuation compared to its rival, with shares trading at 17 times the next year’s estimated earnings, compared to 14 times for UPS.
UPS ranks No. 1 and FedEx No. 2 on the Transport Topics Top 100 list of the largest for-hire carriers in North America. UPS Supply Chain Solutions is No. 5 on the TT Top 100 list of the largest logistics companies. The company also ranks No. 3 on the TT Top 50 list of the largest global freight carriers.
FedEx ranks No. 3 on the TT Top 50 list of the largest global freight carriers and No. 43 on the TT Top 100 list of the largest logistics companies in North America.
