FEDEX margins in its core delivery segment dropped in the latest quarter from a year earlier, and shares fell 6 percent in extended trading on Tuesday even though the company beat profit estimates and projected 11 percent revenue growth this year.
The operating margin in the Federal Express segment fell to 7.7 percent from 8.4 percent a year earlier as costs climbed for employee salaries and benefits, outsourced transportation and fuel.
That matters because FedEx, on June 1, spun off its trucking segment, FedEx Freight, to focus on that delivery business.
Investors are closely watching how much the slimmed-down company can boost profits by growing its high-profit services, including delivering temperature-controlled medicines, while also keeping a tight lid on costs.
During the Memphis-based company's earnings call, one analyst noted that relative growth in the fiscal fourth quarter was a bit lower than what analysts were expecting to see over the coming several months.
Chief Financial Officer Claude Russ said margins would improve as compensation-related burdens decline.
Global tariffs imposed by US President Donald Trump have weakened demand for delivery services by FedEx and rival UPS. Evolving US trade policies, including the end of US duty-free "de minimis" low-value e-commerce shipments from China-linked discount retailers such as Shein and Temu, have weighed on volumes.
FedEx forecast earnings per share of $16.90 to $18.10 for the year, as it shifts its fiscal year to align with the calendar year, from its previous May year-end.
Analysts have not yet built models that enable comparisons with the new forecast, which includes just its delivery operations.
Adjusted profit for the fourth quarter that ended May 31 rose to $6.31 per share, topping the analysts' average estimate of $5.96, according to data compiled by LSEG.
Quarterly revenue climbed 12.6 percent to $25 billion, topping expectations of $24.04 billion, helped by strong domestic demand.
The quarterly results include the trucking business that FedEx spun off this month.
FedEx also said it would buy back shares worth up to $1 billion in 2026.