UPS vs. FedEx: Which stock is the better buy now?

Wells Fargo's analysts provided a nuanced perspective on UPS and FedEx (NYSE:FDX) in separate notes on Friday. They initiated one with a bullish rating, while the other stock was viewed more neutrally.

The bank started FDX at Equal Weight with a $275 price target in its note, stating that while they see a compelling multi-year growth opportunity, there are near-term risks.

"While we see long-term value in FDX shares and expect its transformation to improve margins, returns, and cash flows, near-term risks abound," Wells Fargo writes.

They highlighted that they believe the consensus is mis-modeling 2025, while they also note the Express and Ground integration looms. As a result of its current cautiousness, the bank feels the UPS story is more compelling in the near-term.

UPS was initiated with an Overweight rating and a $156 price target. Wells Fargo said that following a rocky 2023 and early 2024, they think the bar is too low for the company.

"UPS has a number of cost initiatives that de-risk its market assumptions for LT [long-term] guidance, making above-consensus EPS appear achievable by 2026," says the bank.

"In March, UPS outlined a financial plan that implies '26 EPS of almost $13. The market appears quite skeptical, with consensus just above $11," they add. "This skepticism provides an interesting opportunity, in our opinion, as we believe the outcome is likely better than consensus expects (WF = $11.70). While the parcel market reset is hard to judge, we gain comfort from elevated cost out programs, which de-risk UPS's market assumptions."