Expeditors Q1 Earnings In Line, Revs Beat Ests - Analyst Blog

Expeditors International of Washington Inc. EXPD reported first-quarter 2014 adjusted earnings of 42 cents per share, in line with the Zacks Consensus Estimate. Results, however, improved 7.7% from the year-ago earnings of 39 cents per share.

Total revenue rose 5.6% year over year to $1.491 billion and edged past the Zacks Consensus Estimate of $1.489 billion. Steady air and ocean freight volumes along with a good show in the customs brokerage business boosted the company's performance in the quarter.

Gross profit (net revenue) increased 3.7% year over year in the quarter to $464.6 million. Gross margin (yield) was 31.1%, down from 31.7% in the year-ago quarter.

In the first quarter, operating expense rose 5.6% to $1.36 billion while operating income improved 5.2% to $135.2 million. Disciplined execution aided the year-over-year improvement in operating income.

Revenue Segments                                                         

Airfreight Services revenues improved 4.3% year over year to $647.1 million in the first quarter.

Ocean Freight and Ocean Services revenues increased 5.3% year over year to $469.2 million.

Customs Brokerage and Other Services revenues rose 8.0% year over year to $375.3 million.

Liquidity

Expeditors' exited the first quarter with cash and cash equivalents of $1,131.0 million as compared to $1,247.6 million at the end of 2013. Operating cash flows were $173.9 million versus $165.2 million in the prior-year quarter.

Zacks Rank and Other Stocks

Another logistics company, C.H. Robinson Worldwide Inc. CHRW, reported first-quarter results on Apr 29, 2014 after market close. The company's adjusted earnings of 63 cents were ahead of the Zacks Consensus Estimate by a penny.

Currently, Expeditors carries a Zacks Rank #3 (Hold). Other stocks worth considering in this sector include P.A.M Transportation Services Inc. PTSI and Covenant Transportation Group Inc. CVTI. PTSI has a Zacks Rank #1 (Strong Buy) while CVTI carries a Zacks Rank #2 (Buy).

Our Analysis

We believe continued strength in the airfreight business owing to growing trade between the U.S. and China places the company favorably in the freight forwarding and customer brokerage business. Further, Expeditors' growing supply chains and cost-control measures should support revenue and margin expansion going forward.

Nevertheless, we remain cautious about weak consumer and business demand as well as higher freight rates charged by third party carriers which might hurt the company's revenues.