Earnings Preview: Expeditors - Analyst Blog
02 November 2012 - 6:15PM
Zacks
Expeditors International of Washington Inc.
(EXPD), one of the leading third-party logistics (3PL) providers,
is slated to release its third quarter 2012 results on Tuesday,
November 6. The current Zacks Consensus Estimate for the quarter is
pegged at 43 cents per share, representing a year-over-year
increase of 10.6%.
Second-Quarter Flashback
Expeditors’ second quarter adjusted earnings of 39 cents per
share 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.
Total revenue decreased 5% year over year to $1.5 billion, and
missed the Zacks Consensus Estimate of $1.6 billion.
Agreement of Estimate Revisions
Estimate revisions for the company mostly show a downward
trend.
For the third quarter, out of 17 estimates none moved upward,
while one estimate was revised downward in the last 7 days. For the
last 30 days, none of the estimates were revised upward, while five
downward revisions were made.
For 2012, out of 18 estimates, no upward or downward revisions
were made in the last 7 days. Over the last 30 days, no positive
estimate revisions were made but three estimates were revised
negatively.
For 2013, out of 18 estimates, one was revised positively,
whereas no negative revision was registered in the last 7 days.
Over the last 30 days, one each was revised in either
direction.
We believe that if the company does not concentrate on higher
cost pass through to customers, poor margin scenario will likely
persist in the near term. We expect a negative impact on the
company’s margins due to freight rate increases by third party
carriers, particularly across Asia-U.S. trading networks.
On July 11, 2012, 15 ocean carriers operating in the eastbound
Asia-to-U.S. trade represented by the Transpacific Stabilization
Agreement (TSA) announced their largest rate increases for 2012.
Ocean freight margins are further expected to be negatively
impacted as oceanliners are unlikely to offer any volume discounts.
This may lead to higher freight rates that will affect freight
forwarders' purchased transportation cost.
In addition, lower demand impacted by global economic slowdown
would remain a constant headwind in the remainder of the year,
resulting in below-average volume growth.
However, the company has been delivering solid net revenue and
operating income backed by strong cost-control measures despite the
downturn in global freight demand. These parameters could continue
aiding earnings improvements for the company in the near term and
beyond.
The company does not expect any headcount addition in the near
term in proportion to volume growth, which indicates margin
expansion.
Magnitude of Estimate Revisions
Over the last 7 the magnitude of the third quarter estimate
revisions remained unchanged at 43 cents and dropped by a penny
over the last 30 days.
For fiscal 2012, the Zacks Consensus Estimate remained static at
$1.64 over the last 7 and 30 days.
Similarly, for fiscal 2013, the Zacks Consensus Estimate
remained was $1.92, unchanged over the last 7 and 30 days.
Earnings Surprises
The company has delivered negative earnings surprises over the
trailing four quarters with an average miss of 4.62%.
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 (a short-term Hold rating).
CH ROBINSON WWD (CHRW): Free Stock Analysis Report
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
Expeditors International... (NASDAQ:EXPD)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Expeditors International... (NASDAQ:EXPD)
Historical Stock Chart
Von Jul 2023 bis Jul 2024