FedEx Corp. (FDX) said fiscal first-quarter earnings will exceed its previously dour forecast and issued a better-than-expected outlook, the latest evidence that the steep downturn in the shipping sector has at least stabilized.

FedEx shares climbed 7%, or $5.02, to $77.68 in recent trading.

A number of top U.S. freight railroads, as well as trucking company Con-way Inc. (CNW), said earlier this week that shipping volumes have shown improvement in recent weeks, albeit industry volumes still remain off significantly from 2008 levels.

FedEx, a top package-delivery company that's often viewed as something of an economic bellwether, announced Friday that earnings for its fiscal first quarter ended Aug. 31 will come in at 58 cents a share. The figure marks more than a 50% drop from a year ago but is well ahead of the company's previous forecast of 30 cents to 45 cents a share.

FedEx also said Friday that fiscal second-quarter earnings will range from 65 cents to 95 cents a share. Wall Street has been projecting FedEx's second-quarter earnings at 70 cents a share.

Among other things, the company said the second-quarter outlook reflects anticipation of "a continued modest recovery in the global economy."

FedEx credited its better-than-expected first-quarter results primarily to international-priority shipping services, which include shipments between foreign countries as well as U.S. shipments outbound for foreign countries. FedEx also cited cost-containment efforts.

A FedEx spokesman declined to comment specifically on domestic shipments, citing proximity to the company's formal first-quarter earnings release and conference call Thursday.

In a prepared statement, however, Chief Financial Officer Alan B. Graf Jr. cautioned that it remains "difficult to predict the timing and pace of any economic recovery," despite what he described as "some encouraging signs in the global economy."

Graf noted that revenue per shipment slipped in each of the company's transportation segments during the fiscal first quarter, compared to a year ago. He attributed the trend to reduced fuel surcharges, as well as to a competitive pricing environment and continued overcapacity in the less-than-truckload freight market.

Separately, FedEx disclosed that an Internal Revenue Service audit team plans to assess taxes and penalties of $14 million related to employment and withholding taxes in 2002. The company said it plans to contest what it described as "erroneous conclusions" relating to its use of some independent contractors.

Regardless, the proposed assessment represents something of a victory for FedEx, because the IRS previously had assessed a $319 million penalty regarding the issue before withdrawing it late last year.

The IRS still is looking at similar issues for 2004 through 2008. FedEx also is battling a number of lawsuits regarding the employment status of its delivery drivers.

-By Bob Sechler, Dow Jones Newswires; 512-394-0285; bob.sechler@dowjones.com

(Mike Barris contributed to this article)