Don't Panic Over UPS: These 2 Mega-Cap Stocks Are the Real Opportunity

By James Halley – Apr 10, 2026 at 9:05PM ESTKey PointsApplied Materials and Caterpillar both have substantial moats.Both companies are showing strong revenue growth.UPS is seeing declining revenue and earnings.Labor issues, declining revenue, and a risky dividend are steering investors away from United Parcel Service (UPS +0.06%), with its shares falling more than 5% over the past month. Instead of worrying about UPS's future, there are mega-cap stocks that continue to deliver, even if they aren't in the delivery business. Here's why investors should consider Applied Materials (AMAT +0.42%) and Caterpillar (CAT +0.46%) instead. Image source: Getty Images. Why UPS is a risk The delivery company is dealing with the high costs of its 2023 and 2025 Teamster contract negotiations, though it just reached a settlement regarding severance issues. These union contracts have locked in higher wage floors, which pressure margins during periods of sluggish global trade. On top of that, the company's decision to part ways with Amazon has reduced its revenue and earnings. It posted 2025 revenue of $88.6 billion, down 2.6% and earnings per share (EPS) fell 2.8% to $6.56. On the plus side, its dividend yield is 6.7%, but with a payout ratio of 113%, that's not sustainable. ExpandNYSE: UPSUnited Parcel ServiceToday's Change(0.06%) $0.06Current Price$101.70Key Data PointsMarket Cap$86BDay's Range$101.26 - $102.4052wk Range$82.00 - $122.41Volume4.5MAvg Vol6.5MGross Margin18.53%Dividend Yield6.45% Applied Materials has a great long-term focus Applied Materials makes highly specialized tools, services, and software for manufacturing semiconductor chips, so it benefits from the growth in artificial intelligence (AI) computing. It holds leading market share in deposition tools that add ultra-thin layers of materials (such as insulating or conducting films) to a wafer, and in etching tools that remove materials to create the intricate patterns of a chip's circuit. In the first quarter, Applied Materials reported revenue of $7.01 billion, down 2%, due largely to falling sales in China, but EPS rose 75% to $2.54, as margins improved dramatically. That drop in sales isn't expected to last as it said it expects semiconductor equipment sales to grow by more than 20% this year. The stock is up more than 175% over the past year and more than 35% so far this year as of this writing. ExpandNASDAQ: AMATApplied MaterialsToday's Change(0.42%) $1.68Current Price$399.49Key Data PointsMarket Cap$316BDay's Range$398.98 - $407.2952wk Range$132.80 - $407.29Volume6.4MAvg Vol7.5MGross Margin48.72%Dividend Yield0.46% Caterpillar is a surprise beneficiary of data center growth Caterpillar, besides its heavy equipment business, dominates the market for global backup generators used by hyperscale data centers. The industrial company is seeing strong sales growth and has a large backlog for its massive diesel and natural gas reciprocating engines that provide emergency power for data centers. So far this year, its shares are up more than 24% and over the past year, they are up more than 148% as of this writing. ExpandNYSE: CATCaterpillarToday's Change(0.46%) $3.59Current Price$790.66Key Data PointsMarket Cap$366BDay's Range$786.24 - $797.8552wk Range$282.46 - $797.85Volume1.9MAvg Vol2.8MGross Margin32.21%Dividend Yield0.75% Caterpillar just celebrated its 100th year as a company, and it reported record revenue of $19.1 billion in 2025, an increase of 18%. The company spent heavily on research and development and was affected by tariffs, so its yearly EPS fell 17.2% to $18.81. On the plus side, the company has a record backlog of $51.2 billion, up 71%, thanks to ongoing projects for hyperscalers such as Amazon and Microsoft. It's all about the growth It's much easier for growth stocks like Applied Materials or Caterpillar to improve profitability, revenue, or both than for a company like UPS to eke out better profits as its plans mean that it knows revenue will fall. That's why, even with their share gains so far this year, Applied Materials and Caterpillar are good long-term investments. 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Are Visa and Mastercard Stock in Trouble?Stocks MentionedApplied MaterialsNASDAQ: AMAT$399.49(+0.42%)+$1.68CaterpillarNYSE: CAT$790.66(+0.46%)+$3.59MicrosoftNASDAQ: MSFT$370.82(-0.60%)-$2.25United Parcel ServiceNYSE: UPS$101.66(+0.02%)+$0.02AmazonNASDAQ: AMZN$238.43(+2.05%)+$4.78*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.