The US Economy and FedEx

NEW YORK ( TheStreet) -- There are many important headline stories having an impact on all investors as we reach the mid-point in December.

One of these was the outcome of the Federal Reserve's Open Market Committee's quarterly meeting leading to mostly encouraging news.

Reuters reported Wednesday, "The Federal Reserve ramped up its stimulus to the economy on Wednesday, expressing disappointment with the pace of recovery in employment as contentious U.S. budget talks heighten uncertainty about the outlook."

The report explained, "The central bank replaced a more modest stimulus program due to expire at year-end with a fresh round of Treasury purchases that will increase its balance sheet. It committed to monthly purchases of $45 billion in Treasuries on top of the $40 billion per month in mortgage-backed bonds it started buying in September."

That's a total of $85 billion per month.

There was even a surprise element to Ben Bernanke's iteration of the FOMC policy decisions. The Fed decided to embrace numerical thresholds for policy, a step that had not been expected until early next year. These included targets concerning employment and inflation which the Fed is aiming for.

TheStreet.com's Director of Research Stephanie Link was asked in a recent CNBC interview her views on how the FOMC's policies and Bernanke's press conference might impact upon the financial markets. Link was referred to as "the trader who follows the short-term swings." The interview is multi-faceted and well worth listening to.

Jim Cramer and Stephanie Link actively manage a real money portfolio for his charitable trust- enjoy advance notice of every trade, full access to the portfolio, and deep coverage of the latest economic events and market movements.

To be more specific, the Fed said it will likely keep official rates near zero until the unemployment numbers fall to or below 6.5%. It also earmarked inflation, saying the 0% official rate would continue because we're between one and two years ahead of the time where it projects inflation would not exceed 2.5% and long-term inflation expectations remain contained.

Speaking of the cost of things, import prices recorded the biggest drop in five months in November as food and fuel costs fell, keeping inflation at bay against the backdrop of an economy on the ropes.

The Labor Department said on Wednesday import prices fell 0.9% after three straight months of gains. October's data was revised to show a 0.3% increase rather than the previously reported 0.5% gain.

"Economists polled by Reuters had expected import prices to fall 0.5% last month. In the 12 months to November, import prices fell 1.6%," the news service reported.

"Stripping out fuels and food prices, import prices dipped 0.1% as the cost of capital goods fell by the most since March 2010 and automobile prices were flat, indicating that broader inflation pressures remained benign.

"The global economy is restraining prices here and abroad. This indicates global demand is soft and will remain soft in the near term," said Gus Faucher, a senior economist at PNC Financial Services in Pittsburgh. "This adds to the perception that inflation is not a concern."

Meanwhile, The Wall Street Journal reported Wednesday that at least one FedEx ( FDX) employee suspected the worldwide delivery company was overcharging customers in 2011.

This became public when some internal emails were used in a lawsuit that accuses FDX of overcharging business customers by improperly "...assessing them residential surcharges. The emails were released by a federal judge in Memphis Monday.

Evidently a company sales rep in Scottsdale, Ariz., complained in an email to a superior his belief that FDX had been "systematically overcharging our customers for residential delivery fees."

The Journal quoted the sales rep saying, "I have brought this to the attention of many people over the past five years, including more than one managing director and no action has been taken to address it."

A FedEx spokeswoman, Sally Davenport, said in an email to the newspaper on Tuesday that FedEx "highly values" its relationships with its customers (both business and residential). These "documents do not tell the entire story of this case."

Davenport was also reported to have written that FDX "will continue to defend these allegations in a court of law." She made it clear that customers with billing concerns can pursue refunds online or call the company. The important point to remember here is that these are "allegations", not proven facts.

On Wednesday, Link and Jim Cramer wrote to their subscribers that FDX is set to report earnings on Dec. 19 before the markets open. Consensus expectations are calling for earnings per share of $1.41.

"Hurricane Sandy's impact will likely lead to a mixed headline number and...big storms such as Sandy hurt the air freight carriers in a several ways: having to ground fleets ahead and during the storm, incurring aftermath cleanup costs and running up transportation/line haul costs to guarantee commitments previously made to its customers."

Also, international markets (especially Europe) are and have been a mixed bag for FDX. "Much of this is already expected, with analyst estimates having come down over the last few weeks" Link and Cramer opined.

The investment theme for FDX isn't only "...based on its near-term earnings power but rather because it is tied to the leverage in the reacceleration of global trade growth." Analysts are looking for 1.9% sales growth in revenue for the current quarter compared to last year's same quarter.

"We also like the company's restructuring program that is under way, as we believe it will lead to $1.6 billion in profit improvement (by fiscal 2016), the exposure to the emerging markets/recovery in China, and the relative valuation -- a 23% discount to its largest rival, United Parcel Service ( UPS) is well below the last five years, which was 12.3%" Link and Cramer said.

Maybe the allegations and next Wednesday's earnings report don't really matter, because according to the Mayan calendar the world may be ending two days afterward on Dec. 21. That day, coincidentally, is the first day of winter. Perhaps a new ice age will suddenly befall us, which may be a plus for utility stocks.

Assuming someone has misunderstood both the Mayan calendar and FedEx's integrity, by the time all this media hype and the fiscal cliff drama plays itself out, investors may be able to buy shares of FDX at close to its Nov. 19, intraday low of $85.80. At least that would be a better entry point to invest in one of the great players in the air delivery and freight services industry.

By market cap FDX is much smaller ($28 billion) than its main competitor UPS ($70 billion). By the measure of trailing 12-month operating margin FDX (7.6%) is way behind its big, "brown" rival UPS (9.77%) by a factor of almost 29%. FDX has great growth potential, but the proof of the pudding will be in the eating. At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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