FedEx Outperformed UPS in 2024, but Which Dividend Stock Is the Better Buy for 2025?

Core Insights - FedEx has historically been a lower-margin business compared to UPS but has managed to protect its margins in recent years, while UPS' margins are at a 10-year low [2] - The industrial sector is experiencing a trend of breakups for increased flexibility, with companies like Honeywell considering spinoffs in response to investor dissatisfaction [3] - FedEx has lowered its fiscal 2025 revenue forecast to flat growth and adjusted its earnings per share target down to $19-$20, while continuing to focus on cost-cutting and efficiency [4] - Both FedEx and UPS have underperformed the S&P 500 due to an oversupplied package delivery network and challenges from the pandemic [6][7] - FedEx Freight, while smaller, has historically had higher margins compared to the broader FedEx business [8] Financial Performance - FedEx's total revenue for the trailing twelve months (TTM) is $87.39 billion with an operating margin of 6.72$90.69 billion with an operating margin of 8.84% [15] - FedEx has a forward price-to-earnings ratio of 14.3, while UPS's is 16.8, indicating that FedEx may be a more attractive value for investors [9] Strategic Developments - FedEx plans to separate into two public companies, FedEx and FedEx Freight, to enhance focus and agility [16] - UPS has realigned its business strategy to focus on higher-margin segments, such as healthcare products, and has returned to volume and profit growth [17] - UPS has resolved labor disputes that previously increased costs, improving its outlook for 2025 [18] Investment Considerations - Both FedEx and UPS are viewed as compelling investments, with UPS being preferred due to its defined turnaround strategy and higher dividend yield of 5.2% compared to FedEx's 2% [9][20][21] - UPS's ability to maintain its dividend amidst macroeconomic uncertainty makes it a more attractive option for investors [21]