FedEx Corp. shares tumbled after the company posted quarterly profit below Wall Street’s estimates, pressured by rising costs related to a U.S. labor shortage and lower-than-expected package volume that countered gains from pricing increases.

Earnings rose to $4.59 a share in the fiscal third quarter, which ended on Feb. 28, the Memphis, Tennessee-based courier said in a statement late Thursday. Analysts had expected $4.65 on average, according to estimates compiled by Bloomberg. Sales were $23.6 billion, while analysts had predicted $23.5 billion.

“Our strong quarterly operating income increase was dampened by the surge of the omicron variant, which caused disruptions to our networks and diminished customer demand in January and into February,” Chief Financial Officer Michael Lenz said in the statement.

FedEx and other couriers have increased prices for delivery service since Covid-19 ushered in a surge of online buying that hasn’t let up even as the pandemic has eased. Unreliable supply chains have also pushed more freight to the air, driving profit at the company’s FedEx Express unit, which accounts for about half of the company’s sales. The Freight unit, which makes up less than 10% of total revenue, had price and volume gains, helping shore up profit.

Still, FedEx is grappling with rising expenses and lower availability of labor, especially for workers at its sortation hubs. In some cases, the company hasn’t been able to staff its hubs adequately, forcing the courier to reroute packages to other hubs and driving up costs. Although fuel prices have been rising, FedEx mostly offsets those with surcharges to customers.

FedEx Express operating profit increased on higher price per package and a net fuel benefit, the company said. Operating profit fell at the Ground unit mostly because of higher purchased transportation, employee wages and network inefficiencies. Ground unit volume was little changed from a year earlier.

Overall adjusted operating margins rose to 6.2% from 4.9% a year earlier, FedEx said, short of estimates.

Several analysts reduced FedEx stock price targets following the earnings report, including those at Morgan Stanley, Citi and JPMorgan. “Cost inflation remains a headwind,” Citi analyst Christian Wetherbee said in a note.

FedEx shares fell 6% at 9:42 a.m. Friday in New York after an earlier decline of 6.6%, the biggest intraday slide since September.

More Compensation

In an unusual move, about 800 of FedEx’s 6,000 delivery contractors signed a petition asking for more compensation because the inflated volume estimates resulted in them paying for more rental trucks and extra workers than needed to handle the holiday rush, Bloomberg reported last week. FedEx responded by saying that it’s working to improve volume forecasts and that it recognizes recent operating challenges.

The company said earlier this month that Richard Smith, the son of founder Fred Smith, will take over as chief of the Express unit in September. That may pave the wave for Raj Subramaniam, who the founder has designated as his eventual successor, to become CEO of FedEx and for the elder Smith to step back in the role of executive chairman.

FedEx is also grappling with disruption from Russia’s invasion of Ukraine. The company has said it suspended service in Ukraine, Russia and Belarus, but it’s unclear what impact that will have on FedEx’s sales and profit.

The company on Thursday reiterated its annual forecast for earnings of $20.50 to $21.50 a share, excluding fluctuations in the value of its pension fund and other expenses. The company cut its forecast for capital expenditures by $200 million to $7 billion.