On Oct 16, 2013 we maintained our Neutral recommendation on
third party logistics service provider
Expeditors International of Washington Inc.
). We believe that over the long term, the company will
outperform its peers based on its strategic initiatives, superior
business and growing supply chains. However, sluggish economic
growth and weak consumer and business demand might hurt the
company's revenues. This Seattle-based company holds a Zacks Rank
Expeditors has a strong foothold in the international freight
forwarding business, in particular airfreight. Continued strength
in the airfreight business owing to growing trade activity
between the U.S. and China and the launch of several electronic
products including the popular iPhone 5S and Samsung Galaxy Note
III are likely to support Expeditors revenue growth.
The company is trying to expand in the high-margin
customs-brokerage business to tap the growing global trade and
increased import-export activity. In addition to oil and gas as
well as defense, recovery in the housing and construction
business will add an opportunity for growth.
The company's asset light business model allows it to maintain
a debt-free balance sheet, which we believe will enhance its
investment plans thus providing higher returns to its
However, weak demand from consumers and businesses remains a
headwind for Expeditors which earns a major portion of the
revenue from customers in industries with shipping patterns tied
closely to consumer demand. A sluggish pace of economic growth is
only expected to aggravate the problem.
Moreover, if the company fails to pass on the higher costs to
customers, the company's margins could be hurt. Higher freight
rates charged by third party carriers could also have a negative
impact on the company's bottom line. We thus remain sidelined on
Other stocks that are worth considering within this sector are
Radiant Logistics Inc.
Student Transportation Inc.
). RLGT and UHAL currently hold a Zacks Rank #1 (Strong Buy),
while STB carries a Zacks Rank #2 (Buy).
EXPEDITORS INTL (EXPD): Free Stock Analysis
RADIANT LOGIST (RLGT): Free Stock Analysis
STUDENT TRANSPT (STB): Free Stock Analysis
AMERCO INC (UHAL): Get Free Report
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