Expeditors International (NASDAQ: EXPD) reported its financial results for the second quarter of 2019 on the morning of August 6, before markets opened. Expeditors’ earnings per share of $0.88 beat the Street’s estimates of $0.80 (overall net earnings attributable to shareholders grew 9 percent year-over-year to $153 million).
The Seattle-based international freight forwarder grew revenues by 4 percent to $2.03 billion and net revenues by 3 percent to $661.6 million.
The third-party logistics provider managed to navigate the stormy seasons of an intensifying U.S.-China trade war and a general slowdown in the global economy, managing through a 7.5 percent year-over-year reduction in air freight revenue and flattish ocean freight revenues. Customs brokerage was the big star of the quarter, growing revenues in that division by 19.8 percent year-over-year to $750.1 million for the quarter.
“During the quarter and throughout the first half of the year, we have shown our ability to manage uncertainty and deliver profitable growth,” said Jeffrey S. Musser, president and chief executive officer, in a statement. “While our air freight business was challenged as a result of a slowdown in export volumes out of North Asia and the United States, we continued to enhance our efforts on growing these two important markets as a focus of our key strategic initiatives. Additionally, the current climate of geopolitical volatility has created uncertainty, but our organization continues to show that the strength of our global presence and customer focus has never been more important in our relentless drive to grow while maintaining our profitability.”
As demand for transportation services slackened into 2019 and capacity on all modes loosened, Expeditors experienced a 5 percent decrease in air tonnage volume compared to the year prior and a 2 percent increase in ocean container volume. International freight forwarders typically take wider margins on a lower volume of air freight and a narrower margin on higher volumes of ocean freight.
After EXPD posted its results, Deutsche Bank analyst Seldon Clarke lauded the freight forwarder for improving its operating performance in a tough business environment.
“Despite another quarter of net revenue margin compression (-30bps year-over-year), EXPD was able to expand gross profit margins (+50bps year-over-year) through better employee productivity,” Clarke wrote.
Expeditors breaks out its gross and net revenue results by region, which can serve as a useful map of trends in global trade.
Solid economic growth in the United States brought revenues up 13.8 percent to $681 million, while ‘Other North America,’ presumably including Canada and Mexico, was only up 1.5 percent to $85.5 million. Latin American gross revenues were down 9 percent to $38.7 million for the quarter.
Expeditors was hurt most by a sharp decline in revenues from North Asia – i.e., China – which is one of its most important regions. North Asia revenues were down 8.5 percent to $621.9 million for the quarter. South Asia revenues were up 1 percent to $181.3 million. Europe revenues were down 3.4 percent to $319.3 million, and Africa and India revenues were down 4.9 percent to $108.3 million.
EXPD management did not offer forward-looking guidance in the release and does not conduct analyst conference calls.