Expeditors delivers Q2 earnings beat despite ‘sluggish’ market

The Seattle, Wash.-based global logistics provider’s diluted net earnings per share totaled $0.63 per share for the second quarter of 2016, a year-over-year increase of 3 percent, according to the company’s most recent financial statements.    Expeditors International of Washington, Inc. saw its net earnings attributable to shareholders for the second quarter of 2016 slip 1 percent year-over-year to $116 million, according to the company’s most recent unaudited financial statements.
   The Seattle, Wash.-based global logistics provider posted diluted earnings per share (EPS) of $0.63 for the quarter, which increased 3 percent from $0.61 per share the previous year and exceeding consensus analyst estimates of $0.59 per share.
   Second quarter revenues tumbled 13 percent year-over-year to $1.5 billion, missing consensus estimates of $1.53 billion.
   Despite the earnings beat, top-line growth has been hindered by lower fuel surcharges and a “sluggish operating environment,” which has put downward pressure on volumes and rates, according to analysts with William Blair Equity Research’s Global Industrial Infrastructure division.
   “While Expeditors is likely being selective regarding profitable freight opportunities, we believe the company continues to win market share due to its high quality of service,” the investment firm said in a research note.
   Airfreight tonnage grew 2 percent year-over-year for the quarter, while ocean volumes slipped 1 percent compared with second quarter 2015. This was an improvement from air and ocean shipments dropping 9 percent and 3 percent, respectively, during first quarter, but comparisons were more difficult in Q1 due to disruptions caused by the West Coast port slowdown in late 2014 and early 2105.
   In the first six months of 2016, Expeditors net income has fallen 5 percent to $212.6 million compared with the same 2015 period. Diluted EPS slipped to $1.16 per share from $1.17 per share in first half 2015 on revenues that dropped 14 percent to $2.89 billion.
   “We made significant progress in the second quarter, especially in Asia and the U.S., and continued to make the right investments with the right people to advance our strategic initiatives,” Expeditors President and CEO Jeffrey S. Musser said of the results. “The global economic environment remains uncertain, particularly in Europe, and trade continues to slow. Despite these conditions, we continue to gain new customers and expand our market share, and we generated the best quarter of EPS in our history.
   “We remain focused on implementing our strategic plan, with emphasis on markets to and within China and by further leveraging our strength in North America,” he added. “Given our position in the global marketplace, our people and our resources, we remain optimistic about our ability to generate profitable growth.”
   “Even though rates remained volatile again this quarter, we achieved an operating income margin as a percent of net revenues above 30 percent, as our people remain highly disciplined on costs and continue to take advantage of available capacity and rates in all parts of our business,” Expeditors Chief Financial Officer Bradley S. Powell said. “We are investing in the growth of the company, but not without keeping an eye on our margins or allowing costs to impact our profitability, cash flow and returns to shareholders.”
   “While the operating environment remains sluggish given slow global trade trends, we believe Expeditors should continue to benefit from lower carrier buy rates, which should allow for incremental net revenue margin expansion,” said William Blair. “As of now, we are not anticipating much of a surge in activity heading into peak season given inventory levels and stable U.S. consumer spending patterns.
   “However, we are reminded of when consumption picked up unexpectedly during the holiday season and Expeditors benefited from a flurry of expedited shipment needs,” it added. “Highly demanded new product introductions could also be a swing factor, and peak shipping patterns will be something to monitor closely.”