Expeditors Profits Less on Low Rev - Analyst Blog
May 03 2012 - 9:30AM
Zacks
Expeditors International of
Washington Inc.’s (EXPD) quarterly performance lacked
luster yet again. The company reported first quarter 2012 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 in air and
ocean freight segments was primarily responsible for the
underperformance.
Despite not being able to match up
to the Zacks Consensus Estimate and the year-ago profit level,
earnings came within the company’s projected first quarter
estimates of 35–37 cents per share.
Net income attributable to
shareholders declined 16% year over year to $76.7 million in the
reported quarter.
Total revenue decreased 3% year
over year to $1.4 billion, in the process missing the Zacks
Consensus Estimate of $1.5 billion, owing to lower-than-expected
peak seasonal demand throughout the quarter.
On a year-over-year basis, first
quarter revenues from Other North America increased 12.7%. Revenues
from the United States, Latin America, Asia Pacific, Europe and
Africa, as well as Middle East and India declined 0.4%, 6.2%, 5.2%,
3.8% and 8.4%, respectively.
Quarterly gross profit (net
revenues) dropped 2% year over year to $446.6 million, resulting in
gross margin (yield) of 31.6%, up from 31.1% in the year-ago
quarter.
Operating income declined 15% year
over year to $125.3 million and operating expenses also lowered
2.1% year over year to $1.3 billion in the reported quarter.
Revenue
Segments
Airfreight
Services revenue fell 8.8% year over year to $638.9
million in the first quarter.
Ocean Freight and Ocean
Services revenue dropped 1.3% year over year to
$434.3 million.
Customs Brokerage and
Other Services revenues climbed 5.7% year over year
to $338.1 million.
Liquidity
Expeditors’ exited the first
quarter with operating cash flows of $147.4 million compared with
$177.8 million at the end of the year-ago quarter. Cash and cash
equivalents as on March 31, 2012 was $1.4 billion, up from $1.3
billion in the same period a year ago.
Our Analysis
Despite continued decline, we
believe Expeditors International is poised to benefit from recovery
in its freight business, market share gains, productivity
improvement and growing international trade. The company remains
focused on increasing its customer base and plans to further
enhance its business. The company is investing in new opportunities
and services, including those in the aerospace,
pharmaceutical/healthcare, aviation, and energy verticals. Thus, we
believe Expeditors International is well positioned to grow its top
line over the long term. Additionally, the ongoing operating
efficiencies and Expeditors’ ability to pass on the higher rates to
customers will aid profitability going forward.
However, we remain concerned about
the uncertain macroeconomic environment that continues to affect
the global demand trend, thereby hurting Expeditors’ performance.
Further, intense competition from major rivals likes United
Parcel Service Inc. (UPS) and dependence on
asset-based transportation providers may hinder its financials.
We are currently maintaining our
long-term Neutral recommendation on Expeditors International.
However, for the short-term (1-3 months) 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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