On Wednesday December 18th, FedEx (NYSE:FDX) is due to report earnings for its most recent quarter. In an effort to see what Mr. Market is looking for and whether or not FedEx is appealing, I looked at the company's fundamentals over time and compared them to the fundamentals of United Parcel Service (NYSE:UPS). By doing so, I hope to gauge the company's fundamental strength and see if the company has what it takes to be an attractive prospect for the Foolish investor.

Mr. Market has high expectations!
For the quarter, analysts expect FedEx to report revenue of $11.43 billion. According to the company's financials, this represents a 2.9% increase over the $11.11 billion the company reported during the same quarter last year. Though this degree of growth isn't particularly a high bar for most companies to jump, the real test will come in its earnings per share.

If analysts are right about FedEx, then management should report earnings per share of $1.63. This is 17.3% above the $1.39 the company reported during the same quarter a year ago. If this prediction comes to fruition, then the primary driver for earnings growth will likely be a reduction in costs as a percentage of sales, aided by revenue growth but partially offset by an increase in shares outstanding.

How does FedEx stand against United Parcel Service?
As of the time of this writing, the market cap of FedEx stands at $43.2 billion. Although this sounds big for a company, it's dwarfed by the $93.2 billion behemoth that is United Parcel Service, the largest publicly traded package delivery firm in the world. And as the largest, what could be a better yardstick to measure the long-term success of FedEx?

To begin with, let's look at United Parcel's most recent quarter. Revenue for the company came in at $13.52 billion, 3.2% above the $13.1 billion the company reported the same period a year earlier. On top of chalking up relatively attractive revenue growth, United brought in earnings per share of $1.16, a penny above estimates and 141.7% above the $0.48 it reported last year. The primary drivers behind the company's significant earnings growth were fewer costs as a percentage of sales, accompanied by fewer shares outstanding.

Compared to the same quarter a year earlier, United Parcel saw its cost of goods sold fall from 24.8% of revenue to 24.3%. What this means is that, for every dollar in revenue United Parcel brought in, it cost the company $0.005 less to cover its direct costs of providing its services. Even more drastic was the company's selling, general, and administrative expenses, which fell from 58% of revenue to 51.5%. To round out the improvement, management reduced the company's shares outstanding by 2.6% by buying them back on the open market.

Battle of the titans!


As a note of caution, due to the difference in annual reporting periods between the two entities, FedEx's annual data is for fiscal years 2010 through 2013. Furthermore, both revenue and net income are assigned using a base of $1,000 so that we can better compare the growth rate of both revenue and net income over time by measuring the difference in change.

Revenue growth has been fairly consistent for FedEx and United Parcel. Over the past four years, FedEx and United Parcel have seen an uptick in revenue, but with FedEx in the lead. In fact, over this timeframe, the company saw its revenue rise by 27.8% from $34.7 billion to $44.3 billion. In comparison, United Parcel only rose by 19.4%. The initial inclination here might be to attribute the difference in growth rate between the two to FedEx being smaller and having more room to grow. However, when you consider that FedEx's revenue is 81.9% the size of United Parcel's, it's hard to attribute it to anything other than a competitive edge.

Net income, on the other hand, is another story entirely. Over the relevant timeframe, United Parcel grew its bottom line faster than FedEx. That is, until you see both collapse during the last fiscal year. For United Parcel, the decline in profitability took place due to a $4.8 billion pension charge because of a change in its discount rate for postretirement benefits. FedEx was also hit with unusual charges, but these stemmed from business realignment costs and an impairment in its FedEx Express segment.

Foolish takeaway
Based on the data we looked at today, we can conclude that FedEx has been growing faster than United Parcel, but doing so at the cost of lower profitability. If this trend persists, FedEx will catch up with United Parcel but likely won't generate the same kind of margins, making it, in part, less attractive. So, even if the company sees a positive surprise or an earnings match for the quarter, the Foolish investor might consider analyzing United Parcel as a potentially stronger long-term prospect.