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Factors Likely to Influence Expeditors' (EXPD) Q3 Earnings

Expeditors International of Washington, Inc.EXPD is slated to report third-quarter 2018 results on Nov 6.

In the second quarter of 2018, the company delivered a positive earnings surprise of 1.3%. Also, Expeditors has an impressive earnings surprise history. It has surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being approximately 10.2%.

However, things do not look rosy for this Seattle, WA-based company in the soon-to-be-reported quarter. Notably, the negative sentiment surrounding the stock can be gauged from the fact that the Zacks Consensus Estimate for third-quarter earnings moved south 1.3% over the last 60 days.

Given this backdrop, lets delve deep to unearth the factors likely to impact Expeditors' third-quarter results.

The company's bottom line is expected to be hurt by high operating expenses in the quarter to be reported mainly due to rise in oil prices . The rise in fuel costs is a concern for any transportation player, and Expeditors is no exception. This is because expenses associated with oil are considered to be one of the major input costs transports. Higher operating expenses might prove detrimental to the company's operating margins in the third quarter.

We expect expenses to be high at all three reportable segments of the company - Airfreight Services, Ocean Freight and Ocean Services and Customs Brokerage and Other Services in the soon-to-be-reported quarter. While factors like high fuel costs, tighter capacity due to a surge in demand and increased tonnage are likely to push up costs at the Airfreight Services unit, increased labor costs are expected to contribute to the surge in expenses in the Ocean Freight and Ocean Services unit.

Also, the escalating trade-war related tensions between the United States and China might hurt the company's third-quarter results by adversely impacting the volume of shipments.

However, higher revenues on the back of strong international business are likely to aid the top line in the third quarter. The Zacks Consensus Estimate for third-quarter revenues from the airfreight segment, which accounts for bulk of the company's top line, currently stands at $812 million, above the $802 million registered in the second quarter of 2018. Lower tax rates might boost the company's bottom-line growth in the quarter.

Expeditors International of Washington, Inc. Price and EPS Surprise

Expeditors International of Washington, Inc. Price and EPS Surprise | Expeditors International of Washington, Inc. Quote

What Does Our Model Say?

Our proven model too does not show conclusively that Expeditors will beat earnings in third-quarter 2018. This is because a stock needs to have both - a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) - for this to happen. However, that is not the case as highlighted below.

Earnings ESP: Expeditors has an Earnings ESP of 0.00% as both the Most Accurate Estimate is in line with the Zacks Consensus Estimate of 78 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Expeditors' Zacks Rank #4 (Sell) further decreases the predictive power of ESP, making us less confident of an earnings surprise call.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Stocks to Consider

With Expeditors likely to disappoint, investors interested in the Transportation sector may consider ArcBest Corporation ARCB , Hertz Global Holdings, Inc. HTZ Frontline Ltd. FRO and as these stocks possess the right combination of elements to deliver an earnings beat in their next releases.

ArcBest has an Earnings ESP of +5.04% and a Zacks Rank #1. The company will release its third-quarter 2018 results on Nov 1. You can see the complete list of today's Zacks #1 Rank stocks here .

Hertz Global Holdings has an Earnings ESP of +13.48% and a Zacks Rank #2. The company will release its third-quarter 2018 results on Nov 8.

Frontline has an Earnings ESP of +11.77% and is a Zacks #3 Ranked player. The company will release its third-quarter 2018 results on Nov 30.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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