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Expeditors International of Washington Inc.’s (EXPD - Analyst Report) quarterly performance continues to lack luster. The company reported fourth quarter 2013 adjusted earnings of 41 cents per share, widely missing the Zacks Consensus Estimate of 47 cents. The results, however, improved 2.5% from the year ago earnings of 40 cents per share.

In 2014, earnings per share increased 7% year over year to $1.68 but failed to beat the Zacks Consensus Estimate of $1.76. The stock reacted negatively to the news ending the day with a 7% decline.

Total revenue rose 5.9% year over year to $1.62 billion and surpassed the Zacks Consensus Estimate of $1.56 billion. Revenues for the year improved 1.5% year over year to $6.01 billion. Although air and ocean freight volumes remained steady, ocean freight pricing was weak, owing to their overcapacity concerns caused by slow economic recovery.

Gross profit (net revenue) increased 4% year over year in the fourth quarter to $478.1 million while in 2013 it increased 3% to $1,882.8 million. Gross margin (yield) was 29.4%, down from 30.1% in the year-ago quarter. Gross margin for the year was 31.0%, up from 30.6% in the year-ago period.

In the fourth quarter, operating income improved 4.4% to $133.6 million while during the year it increased 4.1% to $552.1 million.

Revenue Segments                                                         

Airfreight Services revenues improved 5.9% year over year to $742.4 million in the fourth quarter.

Ocean Freight and Ocean Services revenues increased 4.9% year over year to $495.6 million.

Customs Brokerage and Other Services revenues rose 7.0% year over year to $387.9 million.

Liquidity

Expeditors’ exited 2013 with cash and cash equivalents of $1247.6 million as compared to $1,260.8 million in 2012. Operating cash flows were $407.5 million compared with $370.1 million in the prior year.

Dividend

The company paid a semiannual cash dividend of 30 cents per share on Dec 16, 2013 to shareholders of record as of Dec 2.

Other Stocks

Another logistics company, C.H. Robinson Worldwide Inc. (CHRW - Analyst Report), reported fourth-quarter results on Feb 4, 2014 after market close. The company’s adjusted earnings of 62 cents failed to beat the Zacks Consensus Estimate of 68 cents.

Currently, Expeditors carries a Zacks Rank #2 (Buy). Other stocks worth considering in this sector include P.A.M Transportation Services Inc. (PTSI) and Covenant Transportation Group Inc. (CVTI - Snapshot Report). PTSI has a Zacks Rank #1 (Strong Buy) while CVTI carries a Zacks Rank #2.

Our Analysis

For the long term, we believe Expeditors is poised for growth based on its strategic initiatives, asset-light business model and growing supply chains. Continued strength in the airfreight business owing to growing trade between the U.S. and China also bodes well.

Nevertheless, we remain cautious about weak consumer and business demand as well as delay in manufacturing, which might hurt the company’s revenues. Sluggish economic growth and higher freight rates charged by third party carriers are other near-term headwinds for the company.

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