FedEx (FDX) shares plummeted 5.88% in after-hours trading on Tuesday, despite the company reporting better-than-expected fourth-quarter earnings. The sharp decline came as the shipping giant provided weaker-than-anticipated guidance for the first quarter of fiscal year 2026, overshadowing its Q4 performance.

For the fourth quarter ended May 31, FedEx reported adjusted earnings per share of $6.07, surpassing the analysts' consensus estimate of $5.87. Revenue for the quarter came in at $22.2 billion, also beating expectations of $21.8 billion. The company's Q4 results demonstrated its ability to navigate through a challenging economic environment and deliver solid performance.

However, investors seemed more focused on FedEx's outlook for the coming quarter. The company forecast first-quarter adjusted earnings per share in the range of $3.40 to $4.00, falling short of the $4.06 analysts were expecting. FedEx also projected Q1 revenue growth to be flat to up 2% year-over-year, citing an uncertain global demand environment.

CEO Raj Subramaniam addressed the challenges facing the company, stating, "The global demand environment remains volatile. We're staying close to our customers to help them plan and adapt as they navigate trade policy changes." He also noted that FedEx is "actively matching our capacity with demand as the environment evolves."

The company highlighted the impact of recent trade policy changes, particularly the end of duty-free status for direct-to-consumer shipments from China. As a result, FedEx has already cut its shipping capacity between Asia and the Americas by more than 35% in response to shifting trade patterns.

Despite the near-term headwinds, FedEx announced it is targeting $1 billion in cost savings from its transformation programs during fiscal year 2026. The company also set its capital spending forecast for FY2026 at $4.5 billion, as it continues to invest in efficiency improvements and network optimization.