By Kannaki Deka

(Reuters) -FedEx Corp’s new chief executive needs to show he can deliver on the promise of implementing aggressive cost cuts, Wall Street analysts said on Friday, after the company laid out plans to slash up to $2.7 billion in expenses for fiscal 2023.

The parcel delivery giant’s plan on Thursday comes after its first-quarter profit was hammered by falling demand in its biggest unit amid a darkening economic picture.

Although analysts largely supported CEO Raj Subramaniam’s plan, they were skeptical of its execution after a series of recent missteps at the company and said the pace of cost cuts might not be enough to deal with declining volumes.

FedEx in March named Subramaniam, who was the operating chief, to the top job, succeeding company founder Fred Smith.

The company has been grappling with operational challenges in integrating its multi-billion dollar TNT Express acquisition and in dealing with contractor unrest, even as the industry faces the prospect of excess capacity amid a volume slowdown.

Last week, FedEx withdrew the financial forecast it issued just three months ago, adding to investor frustrations about a delay in turnaround.

“A period of execution will be key to luring investors back to the story despite the current valuation,” Wells Fargo analyst Allison Poliniak-Cusic wrote in a note.

Analysts, frustrated with its performance when compared with rival UPS, grilled FedEx executives on Thursday on whether they had a right team in place to put the company on the right path.

“Your asset efficiency is literally half that of your nearest competitor, which is unionized, if I might add,” Barclays analyst Brandon Oglenski told company executives, referring to UPS.

FedEx’s shares dropped 3.9% to a more than two-year low of $148.50 in early Friday trade. They have shed 40% for the year as of Thursday’s close, compared with a 22% drop in shares of UPS.

However, it is not all doom and gloom for the company. Some analysts said FedEx had enough room to cut costs and pricing power was holding up, for now.

“There is abundant evidence that there are excess costs at FedEx, which could be trimmed with proper management focus and execution,” Credit Suisse analysts said.

(Reporting by Kannaki Deka in Bengaluru; Editing by Anil D’Silva)