As investors struggle to shake fears -- fueled by European debt and U.S. unemployment -- of a double-dip recession, shareholders of FedEx Corp are looking elsewhere for signs of economic growth.

Investors will be watching when FedEx reports its fiscal fourth-quarter results on Wednesday, eager to learn what the world's largest express cargo airline is seeing in its international business.

It's the most anticipation for an earnings report that I've seen in a while, said transportation analyst Kevin Sterling of BB&T Capital Markets. If they're seeing strength, fears of a double-dip may go on the back burner.

Both FedEx and rival UPS Inc , the world's largest package delivery firm, handle so many packages their results are a key barometer of economic health, as shipping volumes rise in boom times and fall during recessions.

But FedEx's numbers can be especially revealing about the global economy because of the company's international focus. In 2009, its Express segment, which serves more than 220 countries and territories, accounted for about half of the company's $35.5 billion in revenue.

FedEx is a compelling way to play globalization, wrote Deutsche Bank analyst Justin Yagerman in a note to clients. He has a buy rating and a $113 price target on the shares.

The company recently implemented $3 billion in cost controls, $1.5 billion of which are permanent. And the recession caused FedEx and its rivals to cut capacity, which means it has pricing power as the economy recovers. Lower costs and higher prices should boost margins, Yagerman said.

But what FedEx investors want to know about most is volume. Indeed, at this point in the quarter, when investors are between earnings periods and hungry for data, FedEx' results might move the market more broadly, Sterling said.

The stock market has been thinking about a double dip but the freight guys are not seeing it, said Sterling. He noted that FedEx recently increased its dividend by a penny to 12 cents per share, a positive sign that indicates the company's confidence in its long-term growth prospects.

FEDEX AND UPS

Like most of the market, FedEx and UPS shares are down in the past month, both about 9 percent.

Year-to-date, however, UPS is up 5 percent, at $60.84 as of Thursday's close, while FedEx is down about the same amount, at $80.26.

That the shipping giants' share prices have recently parted ways might reflect the risk posed to FedEx by the pending reauthorization of the Federal Aviation Administration, Sterling said.

The House version of the bill contains a provision that would make it easier for the International Brotherhood of Teamsters to organize FedEx drivers. They already represent UPS drivers.

Even the possibility that FedEx might unionize is a distraction to management, Yagerman said, and if it did happen, it would mean a margin drag due to higher benefit and pension costs.

Indeed, Goldman Sachs recently advised clients to buy UPS July call spreads on the assumption that FedEx will report strong air traffic trends, according to a note from the bank's options strategists.

This should benefit both companies, they wrote, while UPS does not suffer from regulatory risk from the FAA Reauthorization Bill given an already unionized workforce.

But some read opportunity in the headlines that have pushed FedEx shares down.

Wall Street puts FedEx 2011 earnings at $5.08 per share, according to Thomson Reuters I/B/E/S. The question now is on which side of the five-dollar line the company will fall in its outlook, said Eric Marshall, director of research at Hodges Capital Management, which holds FedEx shares and is considering buying more.

The stock has traded off considerably, Marshall said. Below $80 it looks more interesting. There could be further downside if the economy really does stall out, but FedEx has been battle-tested over the past few years. Long-term, it's a great way to play the global recovery.

(Reporting by Helen Chernikoff; Additional reporting by Doris Frankel in Chicago; Editing by Phil Berlowitz)

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