EXPD Expeditors International of Washington Inc

One of the leading third-party logistic (3PL) providers, Expeditors International of Washington Inc. (EXPD) announced its first quarter 2012 earnings estimates in the range of 35–37 cents per share.

The earnings estimate indicates a decline from Expeditors’ fourth quarter earnings of 43 cents a share. Currently, the Zacks Consensus Estimate is pegged at 43 cents representing a 2.18% growth on an annualized basis.

Given the global economic meltdown that affected the demand trend, Expeditors remains conservative over its earnings expectation.

Despite the company’s strong position in global 3PL market like its peer United Parcel Service Inc. (UPS), we remain cautious on the stock. Uncertainty over air and ocean freight businesses is likely to restrict volume growth. Further, we expect lower demand from the Asian market to continue being a significant headwind over the near term. Going forward, we also emphasize on the rising freight rates by third party carriers, which may weigh on the company’s margins in the current year.

However, we believe Expeditors International is poised to benefit from increasing global trade, market share gains, productivity improvement and growing international trade. We expect its operating performance to improve with strong cost-control measures. Additionally, the ongoing operating efficiencies and Expeditors’ ability to pass on the higher rates to customers will aid profitability going forward. The company is investing in new opportunities and services, including those in the aerospace, pharmaceutical/healthcare, aviation, and energy verticals. Thus, Expeditors is well positioned to grow its top line over the long term.

Further, the company’s debt-free balance sheet is encouraging and provides flexibility for internal growth. Expeditors had a strong cash balance of $1.29 billion at the end of December 2011.

We are currently maintaining our long-term Neutral recommendation on Expeditors International. The company retains a Zacks #3 Rank (Hold).

 
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