4 carriers are entering the strongest season of the year. The most generous pays 5.9% and gives out more than it earns
UPS, FedEx, Old Dominion and XPO beat estimates, yet three of the four stocks fell after reporting results. This year, the sector is making money on pricing, not volumes. The holiday peak will show who can keep it up and whether UPS can fund its 5.9% dividend.
Key points
The four largest carriers beat estimates, yet three of the four stocks fell after reporting results.
The sector's most generous dividend currently amounts to 112% of reported earnings over the past twelve months.
Earnings are growing even as UPS carries 3.3% fewer packages and Old Dominion moves the same tonnage as last year.
Roughly half of the pricing growth at two of the companies comes not from negotiated rates, but from fuel prices.
One carrier is taking the volumes its competitor turns away, and paying for it with $3.9 billion in debt.
The season begins, and the market is selling the growers
In late October, four of the most closely watched carriers in the U.S. reported within two days: UPS $UPS , FedEx $FDX , Old Dominion Freight Line $ODFL and XPO $XPO . All beat analyst estimates. Only UPS was rewarded, gaining more than 5% on the day it reported. Old Dominion fell 5.8%, and FedEx and XPO also declined after reporting results.
The common denominator: earnings are growing thanks to pricing, not volumes. UPS is carrying 3.3% fewer packages in the U.S. than last year, Old Dominion moved the same tonnage as a year ago, and yet both companies increased earnings per share by double digits. What's more, roughly half of the price increase is simply the pass-through of expensive fuel through fuel surcharges.
The holiday peak is starting, too. The TD Cowen/AFS index expects record package delivery prices in the fourth quarter, mainly due to fuel, seasonal surcharges and limited capacity. It's an ideal environment for carriers, and also a test of whether profitability without volume can survive when fuel prices fall.
Company | Price (Nov. 9) | 52-week high | Below high | P/E | Dividend |
|---|---|---|---|---|---|
UPS | 110,96 USD | 122,41 USD | -9,4 % | 18,9 | 5,9 % |
FedEx | 318,84 USD | 345,37 USD | -7,7 % | 19,1 | 1,7 % |
Old Dominion | 170,89 USD | 252,03 USD | -32,2 % | 30,5 | 0,7 % |
XPO | 188,03 USD | 232,05 USD | -19,0 % | 43,6 | none |
UPS: 5.9% a year from a company paying out 112% of earnings
UPS pays shareholders $1.64 per share quarterly, or $6.56 a year. At a price of 110,96 USD, that's a yield of 5.9%, the highest in the sector and roughly three times what FedEx pays. The catch: over the past 12 months, the company earned just under $5.90 per share, so dividends amount to 112% of reported earnings. Sixteen consecutive years of dividend increases are resting on an increasingly thin foundation.
Why are earnings so low? UPS is deliberately shedding Amazon, its largest and least profitable customer. As a result, U.S. daily volumes fell 3.3% in the third quarter and international volumes fell 8.7%. In January, the company announced it would eliminate up to 30,000 jobs and close another 24 buildings, and this year it will spend $1.4 to $1.6 billion on network restructuring.
What's supporting the dividend: revenue per package rose 6.1%, adjusted earnings per share are expected to reach $7.28 this year (a payout ratio of roughly 90%), and free cash flow is $6.1 billion versus $5.4 billion in dividends. Two caveats. Cash flow includes $1.4 billion in one-time driver severance payments, which will drop off next year - good news. But the estimate also got a boost because the company contributed $450 million in its own bonds to the pension fund instead of cash.
According to the earnings call, the holiday peak is expected to bring a 25% jump in daily volumes versus the third quarter, with nearly 70% of packages passing through automated sorting. Meanwhile, the price of 110,96 USD is practically at the Bulios fair value of 110,19 USD, and the analyst consensus of 117 USD doesn't offer much upside. The market is already betting the dividend will hold.
So it's clear - our dividend is safe and secure.
Carol Tomé, UPS CEO, earnings call on Oct. 27, 2026
FedEx: the only one with both volume and pricing growth, yet the stock fell after results
FedEx was the only one of the four to grow both volumes and pricing. Revenue for the quarter ended in September rose 12% to $22.9 billion, adjusted earnings per share increased 28% to $3.74, and the company raised its guidance for calendar year 2026 to $18.00 to $18.60 per share. It also repurchased $2 billion of its own shares between June and September.
The stock still fell after the results. Reported net income dropped to $290 million from $650 million a year earlier due to one-time items, and the guidance didn't offer anything beyond what the market expected after the stock rose 56% in a year. Also note the calendar: FedEx spun off its FedEx Freight division in June and switched to a calendar year, so its next results won't come in December as before, but on Feb. 2, 2027.
A 1.7% dividend with a payout ratio of 32% of earnings is the safest among the four. The issue is more about valuation. A P/E of 19.1 versus a five-year average of 12.8, and a Bulios fair value of $255, are 20% below the current price of 318,84 USD. FedEx has the numbers, but the market has already paid for them.
As our strong operating results and adjusted free cash flow show, FedEx is winning in high-value segments while optimizing its network, leading us to raise our full-year outlook.
Raj Subramaniam, president and CEO of FedEx, earnings press release on Oct. 28, 2026
Trucking: first growth after two years of contraction, yet stocks still fall
Old Dominion is the most profitable trucking carrier in the U.S., and its numbers are a textbook case of pricing growth without volume growth: revenue +13.1%, earnings per share +28.9% to $1.65, but tons per day -0.1% and shipment count -2%. All the growth came from revenue per unit shipped, +13.3%. Without the fuel surcharge, it's just +5.1%. The rest is fuel.
Still, something is changing: tonnage rose year over year in September for the first time after a long downturn, and added 1.6% in October. The market didn't reward it. The stock fell 5.8% on the day of the results and is down 32% from its high of 252,03 USD, to 170,89 USD. The company has practically no debt, pays a 0.7% dividend and trades at 30.5 times earnings. Investors are paying for quality and waiting for volume.
Demand for our services improved during the quarter, and our daily LTL tonnage grew year over year in September.
Marty Freeman, president and CEO of Old Dominion Freight Line, earnings press release on Oct. 28, 2026
XPO is playing the opposite game. Tonnage grew 5%, revenue excluding fuel rose 3.6%, and adjusted earnings per share increased to $1.70 from $1.07; the adjusted operating ratio improved to 80.1%. XPO is taking the volumes Old Dominion turns away and making up for it on pricing. It pays for that with its balance sheet: $3.9 billion in debt versus $260 million in cash, net debt at 2.6 times EBITDA, and no dividend. The stock is 19% below its high, its P/E is 43.6, and the Bulios fair value of $87 is 54% lower. That's a bet on a cyclical recovery, not on cash.
What will decide it: four dates and three numbers
Dates worth putting on your calendar:
Jan. 26, 2027, UPS: estimated EPS of $2.76 and revenue of $25.7 billion. More important than earnings is full-year free cash flow versus $5.4 billion in dividends and the first outlook for 2027 without severance costs.
Feb. 2, 2027, FedEx: estimated $6.43 per share. The holiday quarter will show how much the company charged per package.
Feb. 3 and 4, 2027, Old Dominion and XPO. Old Dominion also releases monthly operating figures, so you'll see November and December before the results.
And three signals that will tell you which scenario is playing out:
1. Fuel prices. Half of the pricing growth at both UPS and Old Dominion is fuel. When fuel gets cheaper, surcharges fall, and we'll see how much the companies actually negotiated with customers.
2. Old Dominion tonnage in November and December. Above seasonal norms means the trucking downturn is over, which XPO will benefit from the most thanks to its financial leverage. Below norms, the high P/Es of both companies have no support.
3. UPS without Amazon. Core volumes grew nearly 2% in the third quarter. If that pace holds and cash flow rises in 2027 as severance costs drop off, the 5.9% dividend will be covered by operations. If not, it'll be covered by another round of cuts, and the company has already made enough of those over the past three years.
