The same day that the chairman of the Federal Reserve was saying economic problems could persist into 2012, the founder of Memphis-based FedEx was telling analysts growth was on the way and the economy was through a “soft patch.”

A portion of the FedEx Express fleet of aircraft await their newest deliveries at the Memphis hub.
(Photo: FedEx Corp.)

“We believe the industrial sector will lead economic growth around the world over the next two years,” FedEx CEO Fred Smith said in the Wednesday, June 22 quarterly earnings call for the air cargo and package delivery giant.

FedEx earnings improved 32 percent for the March to May quarter. Also, the company posted fourth quarter revenues of $10.55 billion, an increase of 12 percent over the fourth quarter of 2010. And it reported a net income of $558 million for the quarter, up 33 percent from the year before.

The positive numbers – and Smith’s words – were countered by Fed Chairman Ben Bernanke.

“Maybe some of the headwinds that are concerning us, like the weakness in the financial sector, problems in the housing sector – some may be stronger and more persistent than we thought,” Bernanke said at his second press conference of the year.

When Smith and Bernanke speak, their words have an impact for different reasons even when they agree.

The reaction to Bernanke is more immediate. Smith’s influence beyond his comments about FedEx may be felt in different ways. But it is just as significant.

Analyst Kevin W. Sterling of BB&T Capital Markets was on the FedEx earnings call and noticed the contrast.

“I think they were offset somewhat by Bernanke,” Sterling said of Smith’s optimistic view. “Bernanke was a little bit more downbeat.”

Smith’s comments were also a mix of his views on the global and U.S. economies and how they work as well as his views of how his company is faring in both.

At one point in the earnings call, Smith and other FedEx executives took several questions about a drop in the operating margin for its express division.

Smith said several times in response to basically the same concern that the company could have upped the margin if it hadn’t decided to instead invest in an expansion of express into international markets, particularly China.

Sterling said that is the difference between the abilities of a corporation of the size and scope of FedEx and other companies that had little choice but to go into survival mode.

“They spent money during the downturn to enhance their network, enhance their technology and just to become more efficient,” Sterling said. “They’ve been driving down their cost structure.”

Smith attributed it to a different viewpoint the second time he took a question about the express division’s operating margin.

“We are making investments in the express business. And we don’t quite look at these things the way some of you folks do,” he said, referring to the array of FedEx divisions as a “portfolio.”

“With the performance that we’re achieving in ground and our return to profitability in freight, we have the ability to speed up in express.”

Smith also touted an “infantry based” view of the economy that contrasts with how economists, including perhaps Bernanke, reach their conclusions.

FedEx talks to “hundreds of thousands of customers” around the world, Smith said, contrasting that with “a view from 50,000 feet.”

“We believe that our economic outlook is reasonably correct,” he added.

Sterling said there is something to the infantry based outlook.

“Every day they are moving a few percentage points of GDP through their network. They have a good look into the market,” he said. “They’re very positive on their international outlook.”

Bernanke had serious concerns about the debt crisis in Greece, saying a default by the government there on its debt would threaten the global economy.

Smith’s view wasn’t all rosy. He acknowledged “pain” in the economic downturn and dangers to growth including fuel prices that have leveled off for now.

But he also made it clear that he views the downturn as something in FedEx’s rearview mirror.

“We believe we did the right things during the downturn and are now capitalizing on those actions,” Smith said in his prepared remarks at the start of the earnings call.

That view didn’t change during his more specific and detailed answers later in the quarterly calls to questions from analysts. And it is those unscripted answers from Smith that the analysts usually pay particular attention to.

“I think Fred is very well respected not only in the analyst community but also on Wall Street,” Sterling said. “They have a great look at really what’s going on day to day in the U.S. community. Ultimately I think he is going to be proven right.”