FedEx Corp raised its fiscal-year outlook on Thursday after quarterly profit more than doubled, with strong Asian export volumes more than compensating for flat U.S. demand.

Although the package delivery giant said the economic recovery was broadening, its shares initially fell 3 percent before recovering to trade up 1 percent.

There may have been some anticipation that they could do even better, said Eric Marshall, director of research for Hodges Capital Management, which has owned FedEx shares in its mutual funds and currently owns them in accounts it manages for institutions and individuals.

Led by exports from Asia, FedEx reported an 18 percent jump in volume out of its International Priority business. But average daily domestic package volume rose just 1 percent, reflecting the weak U.S. economy.

FedEx's share price today is more a prism of people's attitude about the economy than it is about FedEx, said Edward Jones analyst Dan Ortwerth.

Data on U.S. jobless benefits and factory activity on Thursday suggested the economy remained on a modest recovery path.

Transports such as FedEx and larger rival United Parcel Service Inc tend to do their best at the beginning of a recovery, analysts said.

Memphis, Tennessee-based FedEx's shares have risen about 20 percent from a recent low in February. Hodges Capital's Marshall said the company and UPS were both trading at nearly 19 times forecast 2011 earnings, and investors would do well to consider investing in both.

FedEx raised its 2010 earnings forecast to a range of $3.60 to $3.80 a share from a previous outlook of $3.45 to $3.75. Analysts on average expected $3.64, according to Thomson Reuters I/B/E/S.

The company said profit for the third quarter ended February 28 rose to $239 million, or 76 cents per share, from $97 million, or 31 cents per share, a year earlier. That bested the analyst's average estimate of 72 cents per share.

Revenue rose 7 percent to $8.7 billion, higher than the average Wall Street forecast of $8.4 billion.

An improving global economy drove solid financial performance in the quarter, Chief Executive Officer Fred Smith said during a conference call with analysts. In fact, the recovery is broadening.

FedEx and Atlanta-based UPS handle such a huge chunk of U.S. and global shipping that they are considered economic bellwethers.

FedEx said it had reinstated employee compensation programs it had cut in response to the recession despite the dampening effect they will have on earnings in the fourth quarter and into 2011.

The company forecast fourth-quarter earnings of $1.17 to $1.37 per share. Analysts expected $1.26.

FedEx also raised its capital spending outlook for 2010 to $2.9 billion from $2.6 billion, citing additional investments in Boeing 777 aircraft. And it said it was taking aircraft out of storage in the desert and putting it back into service.

You don't take aircraft out of storage unless you think the recovery is sustainable, said Marshall.

FedEx shares gained 1 percent to $90.70 in afternoon New York Stock Exchange trading, while UPS was up 2 percent at $64.11.

(Reporting by Helen Chernikoff; editing by John Wallace and Lisa Von Ahn)