Aid Expeditors (EXPD) Air Cargo Revenue Increases Despite High Indebtedness – June 30, 2022

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Expeditors International of Washington, Inc. (EXPD Free report) is currently benefiting from a slight increase in airfreight revenues. However, a drop in its current ratio is concerning.

Expeditors’ first-quarter 2022 earnings of $2.05 per share beat Zacks’ consensus estimate of $1.77. Net income increased by 22.75% year-on-year. Total revenue of $4,664.3 million topped Zacks’ consensus estimate of $4,175.6 million and was also up 38.9% year over year.

How is Expeditors doing?

Expeditors is helped by rising air freight revenues. Revenue from its air cargo services segment soared 63.3% year-over-year in 2020. The coronavirus-induced cancellation of several passenger flights (which typically carry cargo as well as baggage passengers) has increased the use of charters. Due to the pandemic-induced imbalance between planned capacity and demand, EXPD is using charters to meet customer needs. Air cargo services unit revenue grew 58.4% year-over-year in 2021. Despite cyberattack woes, segment revenue grew 20.6% in the first quarter 2022. Segment revenue is also expected to be strong in the second quarter of 2022. The results will be available on August 2.

We are impressed with Expeditors’ efforts to reward its shareholders through dividend payouts and buybacks. In the coronavirus-ravaged 2020, EXPD repurchased 4.6 million shares at an average price of $72.26 per share. In 2021, EXPD repurchased 4.4 million shares at an average price of $117.54 per share. In May 2022, management announced a 15.5% increase in the semi-annual cash dividend to 67 cents per share ($1.34 per share annualized).

The year-over-year decline in Expeditors’ current ratio in the first quarter of 2022 is concerning. The current EXPD ratio in the first quarter of 2022 was 1.87 compared to 2.05 at the end of the first quarter of 2021.

Zacks ranking and key picks

Expeditors currently wears a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some higher ranked stocks within the broader Zacks Transportation sector are Kirby Company (KEX Free Report), CH Robinson Worldwide, Inc. (CHRW Free report) and GATX Company (GATX Free report) .

Kirby has a trailing four-quarter surprise of 7.7%, on average, with earnings beating Zacks’ consensus estimate in two of the past four quarters (one miss and one hit the other two occasions).

Strong industry performance drives Kirby’s revenue. The distribution and services segment is benefiting from increased demand for products and services. KEX currently carries a Zacks rank #2 (buy).

The expected long-term (three to five year) growth rate of earnings per share (EPS) for CH Robinson is set at 9%. Improved freight market conditions benefit CHRW.

In the first quarter of 2022, revenue improved by 41.8% thanks to favorable truckload prices for customers and healthy profits in ocean freight. CHRW currently carries a Zacks rank of 2.

GATX has a trailing four-quarter surprise of 40.1%, on average, as its earnings have exceeded Zacks’ consensus estimate for the past four quarters.

The gradual improvement in the North American railcar rental market is a boon for GATX. GATX currently has a Zacks rank of 2.

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