Earnings Preview: Expeditors - Analyst Blog
03 August 2012 - 3:45PM
Zacks
Expeditors International of
Washington Inc. (EXPD), one of the leading third-party
logistic (3PL) providers, is slated to release its second quarter
2012 results on Tuesday, August 7. The current Zacks Consensus
Estimate for second quarter earnings is pegged at 43 cents per
share, representing an annualized growth of a negative 1.42%.
First-Quarter
Flashback
Expeditors’ first quarter adjusted
earnings of 36 cents per share that missed the Zacks Consensus
Estimate by a penny and deteriorated 14% from 42 cents earned in
the year-ago quarter. A lackluster revenue performance across most
of its segments was responsible for the downfall.
Total revenue also decreased 3% year
over year to $1.4 billion, missing the Zacks Consensus Estimate of
$1.5 billion, owing to lower-than-expected peak seasonal demand
throughout the quarter.
Agreement of Estimate
Revisions
Estimates revisions for the company
mostly show a downward trend.
For the second quarter, no upward or
downward change has been registered in last 7 days. Over the last
30 days, 4 analysts out of 16 have made downward revisions.
Similarly, for fiscal 2012, out of
17 analysts none made any change over the last 7 days. Over the
last 30 days, none of the analysts made any upward revision but 4
moved down.
For fiscal 2013, out of 17 analysts,
none moved in either direction over the last 7 days. Over the last
30 days, no positive change was registered but 2 analysts revised
the stock negatively.
Given the bleak economic outlook
that is affecting the demand trend, analysts remain conservative
over the company’s earnings expectation.
Despite the company’s strong
position in global 3PL market, we remain cautious on near-term
softness in demand, particularly in ocean freight which has
resulted in lower stockpiles. Further, lower demand from the Asian
market would continue to be a significant headwind over the near
term. Going forward, these emphasize on the rising freight rates by
third party carriers, which may weigh on the company’s margin this
year.
Magnitude of Estimate
Revisions
Over the last 7 days, the magnitude
of the second quarter estimates revisions remained unchanged at 43
cents. However, the earnings estimate dropped by a penny from 44
cents over the last 30 days.
For fiscal 2012, the Zacks Consensus
Estimate remained static over the last 7 days at $1.79 but dropped
by a penny over the last 30 days.
For fiscal 2013, the Zacks Consensus
Estimate remained pegged at $2.10 over the last 7 days but dropped
from $2.11 over the last 30 days.
Earnings
Surprises
With respect to earnings surprise,
over the trailing four quarters, Expeditors underperformed the
Zacks Consensus Estimate, with the average surprise being a
negative 3.38%.
The current Zacks Consensus Estimate
for the ongoing quarter contains a downside risk of 2.33%. For
fiscal 2012 and 2013, the Zacks Consensus Estimates’ downside risk
is measured at 2.24% and 3.81%, respectively.
Our
Recommendation
We remain encouraged by the
company’s best in-class position in the 3PL market. We expect
Expeditors to benefit from growing supply chains and capacity
constraints in the freight market, thereby supporting pricing
gains. Further, the company’s debt-free balance sheet is
encouraging and provides flexibility for internal growth. Over the
long term, Expeditors is poised for growth as it plans to expand
its presence and operations internationally as well as invest in
new opportunities and services.
However, intense competition from
major rivals like CH Robinson Worldwide Inc.
(CHRW), and dependence on asset-based transportation providers may
hinder its profitability over the long term.
We are currently maintaining our
long-term Neutral recommendation on Expeditors International. The
company retains a Zacks #3 Rank (Hold).
CH ROBINSON WWD (CHRW): Free Stock Analysis Report
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
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