Strong Q4, U.S. tax reform boost Expeditors’ profits in 2017

The Seattle-based third-party logistics provider posted net earnings of $489.3 million for the full year in 2017, a 14 percent increase from 2016, as revenues rose 7 percent to 2.3 billion, according to the company’s most recent financial statements.    Expeditors International of Washington, Inc. reported net earnings of $489.3 million for the full year in 2017, a 14 percent increase from 2016, according to the company’s most recent financial statements.
   The Seattle-based third-party logistics provider posted diluted earnings per share (EPS) of $2.69 last year, compared with $2.36 per share the previous year, as revenues rose 7 percent to 2.3 billion.
   Expeditors attributed the growth in earnings in large part to a strong second half performance and a fourth quarter that was boosted by a $39 million net benefit resulting from recently enacted tax reform legislation in the United States. Passed in December, the Tax Cuts and Jobs Act slashed the effective federal tax rate for U.S. corporations from 35 percent to 21 percent.
   During the fourth quarter, Expeditors saw net earnings grow 51 percent to $167 million ($0.92 per diluted share) compared with the same 2016 period, on revenues that increased 16 percent to $1.9 billion
   Expeditors’ airfreight tonnage volumes increased 6 percent year-over-year during the quarter, while ocean container volumes ticked up 1 percent.
   The company repurchased 8.2 million shares of common stock at an average price of $58.16 per share in 2017, including 2.1 million at an average of $64.52 per share in the fourth quarter. This compares with 6.7 million shares of common stock repurchased the previous year at an average price of $50.53 per share (1.3 million at $54.31 per share in Q4).
   “We executed well across all of our businesses in the fourth quarter, with improved performance throughout the second half of 2017,” Jeffrey S. Musser, president and chief executive officer at Expeditors, said of the results. “The global freight industry is stronger than it was a year ago, particularly in certain key lanes and especially for shipments by air. In response to that continued robust demand, and combined with tight capacity and unpredictable rates, we continued to grow profitably by delivering outstanding services and solutions to our customers.”
   “We continued to improve operational performance on many levels, pushing operating efficiency (operating income as a percentage of net revenue) to nearly 32 percent in Q4 and above 30 percent for the full year,” added Senior Vice President and Chief Financial Officer Bradley S. Powell. “We are managing our pricing well in a volatile rate environment, and we are controlling expenses by making the best of our investments in people, processes and core technologies. We will continue to invest in people and systems to support profitable growth, while working to further hone our performance at the District level to move more freight and to move it more efficiently.
   Looking ahead to 2018, Powell said the impact of the U.S. Tax Cuts and Jobs Act on Expeditors’ effective tax rate “will largely depend on the mix of pretax earnings that we generate in our U.S. and foreign operations, as well as further interpretation of and guidance to be issued on the new tax law,” adding that the company currently expects its effective tax rate for the year will be between 31 percent and 34 percent of pretax earnings.