Expeditors International of Washington Inc.
) quarterly performance lacked luster yet again. The company
reported fourth quarter 2012 adjusted earnings of 40 cents per
share that missed the Zacks Consensus Estimate and year ago
earnings of 43 cents. Weak revenue from air freight segment was
primarily responsible for the underperformance.
For the year, earnings per share decreased 12% year over year
Total revenue rose 2% year over year to $1.53 billion, ahead
of the Zacks Consensus Estimate of $1.51 billion. However,
revenues for the year dropped 3% year over year to $5.98 billion.
Gross profit (net revenue) dropped 4% year over year in the
fourth quarter as well as 2012 to $458.7 million and $1.82
billion, respectively. Gross margin (yield) was 27.9%, down from
32.6% in the year-ago quarter. Gross margin for the year was
29.1%, down from 32.6% in the year ago period.
Operating income declined 17% and 14% year over year to $128
million and $530.8 million in the fourth quarter and 2012,
revenue fell 0.7% year over year to $700.8 million in the fourth
Ocean Freight and Ocean Services
revenue increased 7.1% year over year to $472.3 million.
Customs Brokerage and Other Services
revenues inched up 1.4% year over year to $359.9 million.
Expeditors' exited the year with operating cash flows of
$370.1 million compared with $457.1 million at the end of a
Despite the company's strong position in the global 3PL
market, we remain cautious on the near-term softness in demand,
particularly in airfreight. We expect that lower demand from the
Asian market will continue to be a significant headwind over the
These negatives will eventually lead to freight rate hikes by
third party carriers that may continue to weigh on the company's
margins. Additionally, competitive threats from peers like
CH Robinson Worldwide Inc.
) as well as dependence on asset-based transportation providers
contribute to our negative stance on the company.
Expeditors has a Zacks Rank #4 (Sell).
Grupo Aeroportuario del Centro Norte, S.A.B. de
), which have a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2
(Buy), respectively, are stocks we believe worth considering in
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