A Mixed Bag at Expeditors

Expeditors International of Washington Inc. (EXPD - Analyst Report), a third-party logistics provider, has reported third quarter adjusted earnings of 50 cents per share, surpassing the Zacks Consensus Estimate by a penny. Earnings per share increased 14% from 44 cents in the year-ago quarter.

Total revenue dropped 4% year over year to $1.61 billion and was below the Zacks Consensus Estimate of $1.737 billion.

On a year-over-year basis, revenues in the United States, Other North America, Latin America, and Europe and Africa increased 6.7%, 11.5%, 7.3%, and 19.4%, respectively. Revenue from the Asia Pacific, and Middle East and India declined 13.1% and 5.9%, respectively.

Gross profit (net revenue) increased 8% year over year to $493.8 million. Operating income rose 3% year over year to $163.8 million and operating expenses fell 4.3% year over year to $1,442.6 million in the reported quarter.

Revenue Segments

Airfreight Services revenue slid 1.9% year over year to $736.9 million in the third quarter.

Ocean Freight and Ocean Services revenue fell 14.8% year over year to $510.5 million.

Customs Brokerage and Other Services revenues grew 13.3% year over year to $358.9 million.

Liquidity

Expeditors’ balance sheet remained solid with no debt and $1.26 billion in cash and cash equivalents at the end of the third quarter, reflecting an increase from $1.1 billion in the year-ago quarter.

Our Analysis

We believe Expeditors is focused on gaining market share, expanding gross profits, easing capacity constraints as well as increasing operational efficiency. Expeditors’debt-free balance sheet, superior execution,and ability to return cash to shareholders in the form of dividends make it attractive for investment.

However, competitive threats from its major rival United Parcel Service Inc. (UPS - Analyst Report) as well as its dependence on asset-based transportation providers for shipments keep us cautious on the stock for the long term.

We are currently maintaining our long-term Neutral recommendation on Expeditors International. The stock retains a Zacks #3 (Hold) Rank for the short term (1–3 months).

Read the full analyst report on EXPD

Read the full analyst report on UPS