(Reuters) - FedEx Corp FDX.N reported quarterly profit that missed Wall Street estimates on Monday, as employee compensation and other expenses weighed on results.

FILE PHOTO: A package of the FedEx courier delivery services company is pictured in this June 8, 2017 illustration photo. REUTERS/Carlos Jasso/Illustration

Shares in the Memphis-based package delivery company fell 2.7 percent to $248.60 in after-hours trading.

FedEx and rival United Parcel Service Inc UPS.N are considered bellwethers for the U.S. economy and global trade. Investors are monitoring their operations for any disruptions caused by U.S. President Donald Trump's ongoing tariff battles with China and other nations.

Trade between the United States and China accounts for roughly 2 percent of total FedEx revenue. Tariffs implemented so far affect less than 10 percent of company volume, Chief Marketing and Communications Officer Rajesh Subramaniam said on a conference call.

Economic activity in China is starting to moderate as Trump weighs tariffs on another $200 billon in Chinese imports, he said.

“The administration’s announcement is worrisome to everyone,” FedEx Chief Executive Frederick Smith said as the market waited for Trump’s promised decision on the new tariffs on Monday.

Volume increases and other factors pushed FedEx net profit up 40 percent to $835 million, or $3.10 per share, for the fiscal first quarter ended Aug. 31. But that was not enough to satisfy Wall Street, which was looking for an adjusted profit that was 35 cents above the $3.46 per share that FedEx reported.

FedEx accelerated the timing of $200 million in annual pay increases this year, following the passage of Trump’s U.S. Tax Cuts and Jobs Act. That move contributed to compensation-related charges and other items that shaved profits by 48 cents per share in the latest quarter.

“We remain committed to increasing earnings, margins, cash flows and returns this year,” FedEx Chief Financial Officer Alan Graf said in a statement.

To that end, FedEx increased its adjusted earnings forecast to $17.20 to $17.80 per share from a prior range of $17 to $17.60.

FedEx, UPS and the U.S. Post office are preparing for what is expected to be another record holiday package delivery season.

FedEx invested billions of dollars in capacity-boosting network upgrades “that will give them a buffer going into the next peak,” Edward Jones analyst Dan Sherman said.

FedEx also is boosting seasonal hiring about 10 percent to 55,000 workers; adding year-round Saturday delivery; and bringing back Sunday holiday season deliveries as Amazon.com Inc AMZN.O ramps up the pressure on shippers.