(Reuters) - FedEx Corp (NYSE:FDX)'s shares rose as much as 11% in early trade on Friday, after aggressive cost cuts helped the freight bellwether lift its profit forecast despite falling e-commerce package volumes.
The company's results in recent quarters had taken a hit from bloated operations, which frustrated investors and they raised concerns about FedEx's performance in comparison to rival United Parcel Service Inc (NYSE:UPS).
FedEx on Thursday cited progress on its plan to save $3.7 billion in costs by cutting jobs and parking jets, buoying Wall Street.
"Management has been able to cut costs faster than expected which offsets concerns of decelerating pricing support," said J.P. Morgan analysts as they bumped up their price target on FedEx stock by $34 to $233.
(Graphic: FedEx shares over the past 12 months - https://fingfx.thomsonreuters.com/gfx/buzz/egpbyjmalvq/FedEx.png)
However, package volumes are set to remain under pressure in the coming months, FedEx warned, further clouding outlook for the e-commerce and freight sectors that are already grappling with high inflation and could face further challenges from the recent banking crisis.
"(FedEx's delivery) volumes only appear to be stabilizing on easier comps and not recovering activity," J.P. Morgan analysts said.
E-commerce sales at Walmart (NYSE:WMT) Inc rose 17% in its latest reported quarter, far below the peak pandemic level of near 70% growth, while Amazon.com Inc (NASDAQ:AMZN) said last month economic uncertainty was weighing on consumers.
Though some trucking firms had expressed optimism that freight volumes will rebound in the second half of the year, some analysts worry that a spate of challenging macroeconomic indicators will see that timeline slip.
"Although (freight) customers still say they expect a 2H pick-up, they are not reaching out to schedule additional capacity... An acceleration may still occur, (but) we expect confidence to weaken as the timelines get extended," Wells Fargo (NYSE:WFC) analyst Allison Poliniak-Cusic said.
Shares of UPS were also up 2%.