Size can be important for many businesses because economies of scale are important in some industries. This is true in the parcel delivery business, wherever FedEx(NYSE: FDX ) and United Parcel Service(NYSE: UPS ) They are tough competitors. It’s worth noting that FedEx’s market cap just surpassed that of UPS, but that alone isn’t enough to differentiate between these two industry leaders. Here’s a closer look at which of these two stocks is the smart buy in 2026.
FedEx’s market cap is about $83 billion. UPS’s market cap is also around $83 billion. What’s really worth noting here is that UPS’s market cap has declined by 40% over the past five years while FedEx’s market cap has increased by 15%. The difference between these two industrial stocks is the real story, as Wall Street clearly believes that UPS is not as valuable a business as it once was.
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There is some truth in this statement, given that the company has conducted a material business review. The obvious goal is to become a smaller, leaner, and more nimble business. Transformation efforts include divesting old delivery assets, investing in new facilities and technology, and laying off employees. The company even decided to move away from customers who ship large quantities but only in this business UPS offers low profit. FedEx is also making changes to its business, but they are not nearly as dramatic.
UPS believes 2026 will be an inflection point in its turnaround efforts, with the second half of the year stronger than the first. In 2025, there were early signs of improvement as the company’s revenue per piece in the US market rose despite a decline in total revenue. This is basically what the company is aiming for, as it focuses on its most profitable customers and disposes of assets that are less productive. If the company’s financial performance continues to improve, Wall Street may be ready for its higher valuation.
This raises the value debate. FedEx currently has a price-to-sales ratio of 0.95x, compared to a five-year average of 0.67x. The price-to-earnings ratio is nearly 20x compared to the five-year average of 15x. And its price-to-book ratio is 3x compared to a five-year average of 2.3x. It seems a bit expensive, historically speaking.
UPS, by comparison, has historically looked cheap. Its P/S ratio is 0.97x compared to the five-year average of 1.35x. Its P/E ratio is 15x compared to the long-term average of 17x. And its P/B ratio is 5.2x compared to the five-year average of 7.8x. While it makes sense that UPS looks relatively cheap, given the turnaround, that doesn’t change the fact that value investors will now find the stock more attractive than FedEx.
That said, for growth-focused investors, what amount to buy for a volatile stock probably doesn’t make much sense. So, for some investors, FedEx might be a more reasonable option in 2026. Notably, FedEx just raised the low end of its guidance for fiscal 2026. This indicates that the business is performing better than management originally expected, which is clearly a good sign.
Given FedEx and UPS’ large, complex logistics networks, foreign competition is unlikely to be a major headache. And continued growth in e-commerce should support both companies in the coming years. In fact, few companies can marshal a resource Amazon(NASDAQ: AMZN ) To create your own private parcel delivery service. So, in conclusion, FedEx and UPS are both interesting in 2026, but for different types of investors.
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Reuben Gregg Brewer has no position in any of the listed stocks. The Motley Fool has and offers positions on Amazon and United Parcel Service. The Motley Fool recommends FedEx. Motley Fool has a disclosure policy.
FedEx has just replaced UPS as the largest US parcel company. Which stocks are a smart buy in 2026? Originally published by Motley Fool
