(FORTUNE Magazine) – Talk about a bumpy ride. For the past four years stockholders of Federal Express have been rocked by one jolt after another. In 1986 the company lost more than $300 million on its ill-starred facsimile service named ZapMail. In 1988 earnings growth was diminished by a costly campaign to establish package delivery service abroad, a move that culminated in the 1989 acquisition of heavy freight carrier Tiger International for $880 million. Also in 1989, the earth sneezed and three natural disasters -- Hurricane Hugo, the San Francisco earthquake, and a volcanic eruption in Anchorage, Alaska -- disrupted delivery and cost the courier millions of dollars. Reflecting those lumps, the stock's recent price of $56 is below what a share sold for in 1985. Lately, however, some savvy folks have begun betting that the payoff from Federal Express shares is about to commence. They expect a triple scoop of good fortune for the company in the year ahead: declining costs, rising deliveries, and higher rates for its services. The strong earnings improvement, they contend, could push the stock as high as $100 per share by 1992. Says Tad Trantum, an analyst at J.C. Bradford & Co. in Nashville: ''I've been following transportation companies a long time, and I've never seen anything more exciting.'' Though the difficulties of integrating Tiger are not over, many of the costs associated with the acquisition are beginning to decline, as are the huge outlays for developing overseas facilities. Meanwhile, volume is rising at a 15% rate for Federal's domestic business and a 35% rate for international. What's more, the company has just put into effect across-the-board price increases. Kevin Murphy at Morgan Stanley thinks these changes could boost earnings from $2.30 per share for the fiscal year ending in May 1990 to $4.25 next year. But what really gets Federal's fans excited is the company's growing formidability as a worldwide courier capable of delivering packages between any two business centers on the globe within 48 hours. Because Federal's delivery network is so expansive, big customers like IBM and Sharp Electronics have opened up parts distribution centers next to Federal's main hub in Memphis and turned the operation of them over to Federal Express employees. ^ With trends like these, Trantum thinks Federal Express could deliver earnings of $10 per share within the next four years.

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