Expeditors International moved a lot less air and ocean freight in the second quarter than last year, bringing in more revenue anyway but paying more for capacity.
The end result is Expeditors (NASDAQ: EXPD) managed to boost its operating income by 23% in part because it held salaries and other employment expenses in check.
Revenues for the ocean and air freight company climbed 28% compared to the corresponding quarter of 2021. But the cost of transportation rose 32%.
That transportation spend was directed at a significantly lower amount of volume. For the quarter, air freight tonnage was down 17% from Q2 of 2021, while ocean freight tonnage declined 11%.
However, salaries and other operating expenses climbed just 9%, helping to bring about the 23% increase in operating income to $505.9 million, up from $410.6 million.
Net income measured in earnings per share rose to $2.29 from $1.87, an increase of 22%.
Expeditors does not conduct an earnings call with analysts. However, in an earnings news release, President and CEO Jeffrey Musser does discuss the state of the company’s market in greater detail than in most releases, though most of those other companies also hold analyst calls.
In the release, Musser said the second quarter was the strongest in the company’s history, “even while our air and ocean volumes were soft compared to a year ago,”
Expeditors operations also were hit by the lingering impact from the cyberattack the company experienced in the first quarter, Musser said. The company “re-established digital connections with many of our customers, which limited our ability to move cargo through our systems.”
“We believe the volume changes are primarily related to timing of our recovery from the cyberattack, our significant market presence in China, as well as a slowing economy and an overall drop in demand,” Musser said in a summation of the decline in the tonnage Expeditors handled.
Musser’s outlook saw a mix of softening and continued tightness. Airfreight and ocean rates are “elevated and out of balance by historical standards,” he said, even after declining. Capacity is “no longer severely restrained,” said Musser, noting capacity in the air hasn’t risen to adequate levels. As a result, he said the company still needs to “access additional capacity by using air charters to meet shipper demand.”
“Ocean transit times continued to be stretched by port congestion and many ongoing shortages of equipment, labor and warehousing space,” Musser said in the statement. “Various onshore bottlenecks further impacted many of our ocean and air lanes, in addition to affecting our customs business due to record high drayage, storage, delivery, demurrage and detention costs at destination.”
Expeditors Senior Vice President and CFO Bradley Powell said the rates the company pays to acquire capacity “will continue to be highly volatile at least through the end of the year, while generally continuing to trend downward from their highs over the longer term.”
The company’s earnings per share of $2.27 on a GAAP basis were 13 cents better than forecasts, according to SeekingAlpha. But the revenue of $4.6 billion fell below estimates by $100 million, and that may have contributed to a slight sell-off Tuesday in the company’s stock price.
At approximately 12:15 p.m. EDT, Expeditors shares were down $4.09, or 3.85%, to $102.39. The company’s stock price Tuesday was down about 26.3% from its 52-week high of $137.80. But it is up a little more than 4% in the last month.