Expeditors reports both air and ocean tonnage up for first time since ’21

The cost of transportation declined even more, down 17% to $1.43 billion from $1.71 billion in the first quarter of 2023. Salaries declined less than revenue, down 7%, which helped lead to a 22% drop in operating income — a far bigger percentage decline than the decrease in revenue. Net earnings were down 25%, to $169.1 million from $226 million. 

“Both air and ocean carrier capacity continue to grow, further pressuring rates that have already come down significantly from their peaks,” CEO Jeffrey Musser said in the earnings statement. “We have adapted to this current environment by keeping headcount and other costs in check, while continuing to drive efficiency back towards our historical expectations.”

According to SeekingAlpha, GAAP earnings per share of $1.17 was 10 cents better than the consensus forecast. The $2.2 billion in revenue fell short of consensus only by $20 million. 

Expeditors’ net income per share a year ago was $1.45.

Wall Street reaction to the earnings was muted. At approximately 12:40 p.m. EDT, Expeditors’ stock was down $1.42, to $114.22, a decline of 1.23%.

Employee head count declined in key markets, falling in North America to 6,839 from 7,455 a year earlier. Other regions with smaller head counts also declined, and the end result was that employment at Expeditors fell to 18,403 from 19,681 compared to a year ago.

Specifically, Musser said ocean capacity has grown with “an increase in the number of vessels coming on line and out of sync with demand.”

In the air, capacity is growing “as profit minded carriers carefully grow capacity to meet strong passenger demand, particularly for international travel, which has negatively impacted air cargo rates and our profit per kilo.”

But tonnage managed to increase “as buy rates fell faster than sell rates in certain markets,” he added.

Expeditors does not hold an earnings call with analysts. CFO Bradley Cooper said in the prepared statement accompanying the earnings that the employee reduction came mostly through attrition, “as we remain focused on aligning headcount with tonnage and volumes shipped.”

He added that the only area where head count increased was information systems, “as we continue to enhance and bolster our network security.” Expeditors was the victim of a cyberattack in early 2022. 

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