Modifying Compare-Object Output file content

If you're comparing both files by their index, meaning, comparing index 0 on file1 with index 0 on file2 and son on I would personally not use Compare-Object at all since it's pretty slow:

$arr1 = 'orange','strawberry','orange'
$arr2 = 'banaple','cherry','orange','banana'

# Note: I'm placing those 2 arrays for demonstration purposes only.
# $arr1 and $arr2 should be changed to:
# $arr1 = Get-Content .\txt1.txt
# $arr2 = Get-Content .\txt2.txt

$totalCount = ($arr1.Count, $arr2.Count | Measure-Object -Maximum).Maximum

$arr3 = for($i=0;$i -lt $totalCount;$i++)
{
    $status = 'NO CHANGE'

    if($arr1[$i] -ne $arr2[$i])
    {
        $status = 'UPDATED'
    }

    [pscustomobject]@{
        Before = $arr1[$i]
        After = $arr2[$i]
        Status = $status
    }
}

• $arr3 would result in the following:

Before     After   Status   
------     -----   ------   
orange     banaple UPDATED  
strawberry cherry  UPDATED  
orange     orange  NO CHANGE
           banana  UPDATED 

• If you want to export $arr3 I would recommend you to use CSV as export format:

$arr3 | Export-Csv absolultepath\to\file3.csv -NoTypeInformation

• If you want to export as a normal text file:

$arr3 | Out-File absolultepath\to\file3.txt

Same logic but as a function:

function Compare-Files {
[cmdletbinding()]
param(
    [parameter(mandatory)]
    [ValidateScript({Test-Path $_ -PathType Leaf})]
    [System.IO.FileInfo]$BeforeFile,
    [parameter(mandatory)]
    [ValidateScript({Test-Path $_ -PathType Leaf})]
    [System.IO.FileInfo]$AfterFile
)

    $file1 = Get-Content $BeforeFile
    $file2 = Get-Content $AfterFile

    $totalCount = ($file1.Count, $file2.Count | Measure-Object -Maximum).Maximum
  
    for($i=0;$i -lt $totalCount;$i++)
    {
        $status = 'NO CHANGE'

        if($file1[$i] -ne $file2[$i])
        {
            $status = 'UPDATED'
        }

        [pscustomobject]@{
            Before = $file1[$i]
            After = $file2[$i]
            Status = $status
        }
    }
}

Demo:

PS /> Compare-Files -BeforeFile .\file1.txt -AfterFile .\file2.txt

Before     After   Status   
------     -----   ------   
orange     banaple UPDATED  
strawberry cherry  UPDATED  
orange     orange  NO CHANGE
           banana  UPDATED  

PS /> Compare-Files -BeforeFile .\file1.txt -AfterFile .\file2.txt | Export-Csv ...