Earnings Preview: Expeditors Int'l - Analyst Blog
April 30 2012 - 12:00PM
Zacks
Expeditors International of Washington Inc.
(EXPD), one of the leading third-party logistic (3PL) providers, is
slated to release its first quarter 2012 results on Wednesday, May
2. The current Zacks Consensus Estimate for first quarter earnings
is pegged at 37 cents per share, representing annualized growth of
negative 12.24%.
Fourth-Quarter Flashback
Expeditors’ fourth quarter financial results missed the Zacks
Consensus Estimate and also deteriorated from the year-ago level. A
lackluster revenue performance across most of its segments was
responsible for the downfall.
Total revenue for the fourth quarter was also below the year-ago
quarter and Zacks Consensus Estimate due to lower-than-expected
peak season demand that persisted throughout last quarter.
Agreement of Estimate Revisions
For the first quarter, no upward or downward revision was made
by any of the seven analysts in last 7 days. Over the last 30 days,
none of the analysts made upward revisions but 7 made downward
revisions.
For fiscal 2012, no upward revision was made by any of the 13
analysts in last 7 and 30 days. However, 1 and 7 analysts made
downward revisions over the last 7 and 30 days, respectively.
For fiscal 2013, out of 12 analysts none of the analysts made
upward or downward movement in last 7days. Over the last 30 days,
no upward change was registered but 4 analysts moved to the
opposite direction.
Given the global economic meltdown that affected the demand
trend, analysts remain conservative over the company’s earnings
expectation. Further, the company has also projected lower earnings
in the range of 35–37 cents per share. This represents a decline
from Expeditors’ fourth quarter adjusted earnings of 43 cents a
share.
We believe that uncertainty over air and ocean freight
businesses is likely to restrict volume growth in the ongoing
quarter. Further, lower demand from the Asian market will continue
being a significant headwind. Going forward, the rising freight
rates by third party carriers, also represent another drag over the
near-term margin performance of the company.
Magnitude of Estimate Revisions
Over the last 7 days, the magnitude of the first quarter
estimate revisions remained unchanged at 37 cents but dropped by 6
cents (from 43 cents) over the last 30 days.
For fiscal 2012, the Zacks Consensus Estimate, currently at
$1.90, remained unchanged over the last 7 days but dropped 7 cents
(from $1.97) over the last 30 days.
For fiscal 2013, the Zacks Consensus Estimate remained static
over the last 7 days at $2.17 but fell 5 cents (from $2.22) over
the last 30 days.
Earnings Surprises
With respect to earnings surprise, over the trailing four
quarters, Expeditors has outperformed the Zacks Consensus Estimate,
with the average being at 0.67%.
The earnings surprise for the to-be-reported quarter is expected
to be 0.0%. For fiscal 2011 and 2012, the Zacks Consensus
Estimates’ downside risk is measured at 3.16% and 1.84%,
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
United Parcel Service Inc. (UPS), 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 #4 Rank (Sell).
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
UTD PARCEL SRVC (UPS): Free Stock Analysis Report
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