On Jan 10, 2014 we maintained our Neutral recommendation on
third party logistics service provider
Expeditors International of Washington Inc.
). We believe that the company will perform well owing to its
strategic initiatives, superior business and growing supply
chains. However, stiff competition and weak consumer and business
demand might hurt the company's revenues. This Seattle-based
company holds a Zacks Rank #3 (Hold).
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 shipping of several electronic
products including the popular iPhone 5S and Samsung Galaxy Note
III are likely to support Expeditors' revenue growth.
The company is expanding its 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.
We remain encouraged by airfreight margin which is likely to
be strong, given the rebound in airfreight business. Expeditors
is undertaking cost control measures, which will further boost
However, weak demand from consumers and businesses remains a
headwind for Expeditors. Global airfreight business continues to
be affected by the size of consumer products and the timing of
its launches. This could led to rate volatility as third party
carriers try to arrange within their available capacity during
high demand periods.
Moreover, the company's margin will depend on its ability to
pass on the higher costs to its customers. Higher freight rates
charged by third party carriers could also have a negative impact
on the company's bottom line. We thus remain cautious on the
Stocks that are worth considering within this sector include
Pacer International Inc.
XPO Logistics Inc.
Student Transportation Inc.
). All these stocks currently hold a Zacks Rank #2 (Buy).
EXPEDITORS INTL (EXPD): Free Stock Analysis
PACER INTL INC (PACR): Free Stock Analysis
STUDENT TRANSPT (STB): Free Stock Analysis
XPO LOGISTICS (XPO): Free Stock Analysis
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