We recently issued an updated report on Expeditors International of Washington, Inc. (EXPD - Free Report) .
Like many other transportation companies, Expeditors is hit by uncertainties related to the COVID-19 pandemic.
Expeditors’ first-quarter 2020 top line was hurt due to supply-chain disruptions stemming from the coronavirus pandemic. The extended closure of factories in China due to the virus outbreak dented freight volumes in the March quarter. Notably, volumes pertaining to airfreight tonnage and ocean container contracted 7% and 10%, respectively, year over year. Apart from factory shutdowns, commercial flight cancellations and reduced ocean sailings led to double-digit fall in operating income.
With the current economic slowdown due to the COVID-19 pandemic, Expeditors’ operations are under pressure. For instance, North Asia, South Asia and North America registered tonnage declines of 9%, 11% and 4%, respectively, in first-quarter 2020. With the health peril showing no signs of subsiding, volumes is likely to be weak in the second quarter as well, thereby hurting overall results.
Meanwhile, Expeditors currently has a sound balance sheet. We are also encouraged by Expeditors’ sound balance sheet. As of Mar 31, 2020, the company had no long-term debt (other than lease liabilities), mainly due to its asset-light business model. Moreover, its current ratio stood at 2.26 and 2.37 at the end of the first quarter of 2020 and at the end of the fourth quarter of 2019 respectively, comparing favorably with the respective figures for the industry of 1.72 and 1.83. A higher current ratio implies that the company is more likely to meet its liabilities which are due over the next 12 months.
Zacks Ranks & Key Picks
Expeditors currently carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the Zacks Transportation sector are Air Lease Corporation (AL - Free Report) , Ryanair Holdings plc (RYAAY - Free Report) and Teekay Tankers Ltd. (TNK - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings (three to five years) growth rate for Air Lease, Ryanair Holdings and Teekay Tankers is estimated at 3.1%, 20.5% and 3%, respectively.
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