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Expeditors (EXPD) Q2 Earnings: Is a Beat in the Offing?

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Expeditors International of Washington, Inc. (EXPD - Free Report) is slated to report second-quarter 2018 results on Aug 7.

In the first quarter of 2018, the company delivered a positive earnings surprise of 18.8%. Expeditors also surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, with an average beat of approximately 9.9%.

Also, the stock’s impressive earnings history is well reflected in its price performance. In a year’s time, Expeditors has rallied 28.7% compared with its industry’s 2.4% increase.

 

 

Factors Likely at Play

We expect Expeditorssecond-quarter results to be aided by the improving airfreight demand scenario. Additionally, volume growth in the ocean and airfreight divisions is likely to boost results in the soon-to-be-reported quarter. This apart, robust global trade should prove conducive to Expeditors as it derives bulk of revenues from international markets.

Meanwhile, lower tax rates, following introduction of the new tax law (Tax Cuts and Jobs Act), are boosting bottom-line growth and should continue to do so in the second as well. Moreover, the company’s initiatives to reward are commendable. In May 2018, Expeditors raised its semi-annual cash dividend by 7.1% to 45 cents per share (annualized 90 cents per share).

In the wake of the new tax law, we expect a further uptick in such investor-friendly activities. Huge savings from the slashed tax rate has boosted Expeditors’ cash flow. The company’s ability to generate more free cash flow is favorable as far as further dividend hikes are concerned.

However, the bottom line might be under pressure due to high operating expenses in the second quarter.

What Does the Zacks Model Unveil?

Our proven model shows that Expeditors is likely to beat on earnings in the second quarter. This is because the stock has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase its odds of an earnings surprise.

Earnings ESP: Expeditors has an Earnings ESP of +1.54% as the Most Accurate Estimate of 79 cents is a penny higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Expeditors carries a Zacks Rank #2 (Buy), which when combined with a positive ESP makes us confident of an earnings beat.

Conversely, we caution against stocks with a Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Investors interested in the broader Transportation sector may check out a few stocks from the same space like Star Bulk Carriers Corp. (SBLK - Free Report) , Fly Leasing Limited (FLY - Free Report) and Frontline Ltd. (FRO - Free Report) as these too possess the right combination of elements to beat estimates in their next releases.

Star Bulk Carriers has an Earnings ESP of +19.44% and a Zacks Rank #1 (Strong Buy). The company will report second-quarter earnings on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fly Leasing Limited has an Earnings ESP of +1.35% and a Zacks Rank of 3. The company will report second-quarter earnings on Aug 23.

Frontline has an Earnings ESP of +10.59% and a Zacks Rank #3. The company will report second-quarter earnings on Aug 31.

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