Expeditors Reports a Weak Q2 - Analyst Blog
07 August 2012 - 6:58PM
Zacks
Expeditors International of Washington Inc.’s
(EXPD) quarterly performance lacked luster yet again. The company
reported second quarter 2012 adjusted earnings of 39 cents per
share that missed the Zacks Consensus Estimate of 43 cents and
deteriorated 11% from 44 cents earned in the year-ago quarter. Weak
revenues from air and ocean freight segments were primarily
responsible for the underperformance.
Net income attributable to shareholders declined 12% year over
year to $84 million in the reported quarter.
Total revenue decreased 5% year over year to $1.5 billion, and
missed the Zacks Consensus Estimate of $1.6 billion. The decline in
revenue was primarily due to lower shipments from air freight given
poor global demand and lack of projects.
On a year-over-year basis, second quarter revenues from Other
North America increased 3.3%. Revenues from the United States,
Latin America, Asia Pacific, Europe and Africa, as well as Middle
East and India declined 3.6%, 0.8%, 4.2%, 12.1% and 4.8%,
respectively.
Quarterly gross profit (net revenue) dropped 4% year over year
to $453.7 million, resulting in gross margin (yield) of 30.1%, up
from 29.9% in the year-ago quarter.
Operating income declined 13% year over year to $132.4 million
and operating expenses also fell 4% year over year to $1.37 billion
in the reported quarter.
Revenue
Segments
Airfreight Services revenue fell 14.8%
year over year to $638.5 million in the second quarter.
Ocean Freight and Ocean Services
revenue dropped 6.6% year over year to $519 million.
Customs Brokerage and Other Services
revenues inched up 0.8% year over year to $347.4 million.
Liquidity
Expeditors’ exited the second quarter with operating cash flows
of $92.8 million compared with $78.1 million at the end of the
year-ago quarter. Cash and cash equivalents at the end of the
second quarter was $1.4 billion, up from $1.2 billion in the same
period a year ago.
Our Analysis
We remain concerned about the uncertainty over the ocean freight
businesses that are likely to restrict volume growth and affect
near-term profitability for Expeditors. Further, we also expect a
negative impact on the company’s margins by freight rate increases
by third party carriers. Additionally, competitive threats from
peers like CH Robinson Worldwide Inc. (CHRW) as
well as dependence on asset-based transportation providers
contribute to our negative stance on the company.
We are currently maintaining our long-term Underperform
recommendation on Expeditors International. For the short-term (1-3
months) 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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