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Expeditors International of Washington’s 2Q17 Earnings

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Part 2
Expeditors International of Washington’s 2Q17 Earnings PART 2 OF 7

Did EXPD Surpass Analysts’ Revenue Estimates in 2Q17?

EXPD’s 2Q17 revenues

In this part, we’ll discuss Expeditors International of Washington’s (EXPD) 2Q17 revenues and management insights. In 2Q17, the company reported revenues of ~$1.7 billion, compared with analysts’ revenue estimate of ~$1.6 billion. This Seattle-headquartered logistics major beat analysts’ projected revenues by 3.4% in 2Q17.

On a year-over-year basis, Expeditors International of Washington’s 2Q17 revenues jumped 13.4% from ~$1.5 billion in 2Q16. For EXPD, net revenue change is a better measure of performance. Net revenues represent the difference between the rate billed to its customers and the rate EXPD pays to the carrier. In 2Q17, EXPD’s net revenues rose ~2% from $553.1 million to $563.6 million.

Did EXPD Surpass Analysts’ Revenue Estimates in 2Q17?

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EXPD’s revenue sources

Expeditors International of Washington (EXPD) derives its revenues from three primary sources. Each source represents a reporting segment—Airfreight Services, Ocean Freight and Ocean Services, and Customs Brokerage and Other Services.

The Airfreight Services segment accounts for the highest proportion of EXPD’s total revenues with a 40% contribution. The Ocean Freight and Customs Brokerage segments contribute ~32% and 28%, respectively. EXPD operates around the world. Based on geography, the US contributes ~30% of its operating revenues, and 70% of its revenues are garnered from international operations.

Management outlook

EXPD’s president and CEO, Jeffrey S. Musser, noted, “We are especially pleased with the growth in our customs brokerage and other services, particularly in the U.S. through our Transcon business. Rates remained highly unpredictable in the quarter, as they were throughout much of 2016, again putting unusual pressure on our margins.”

Musser added, “While experience has shown us that margin pressure is cyclical, in light of such truly unprecedented rate volatility, we are improving processes to better address the rapid changes in buy and sell rates, which we expect to continue.”

Peer group revenues in 2Q17

Although the freight scenario in the US has improved, carriers haven’t been betting much on it. The financial turbulence experienced by shipping companies (XLI) in 2016 negatively impacted the freight prospects of Expeditors International of Washington (EXPD) and its peers.

With the slight momentum in freight along with an increase in fuel surcharge revenues, carriers reported top-line growth in 2Q17. Let’s look at the 2Q17 revenues of its peers:

  • C.H. Robinson Worldwide (CHRW): $3.7 billion, up 12.4%
  • XPO Logistics (XPO): $3.8 billion, up 2.2%
  • United Parcel Service (UPS): $15.8 billion, up 7.7%
  • J.B. Hunt Transport Services (JBHT): ~$1.7 billion, up 7.0%

In the next part, we’ll look at EXPD’s Airfreight segment in 2Q17.

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