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Expeditors International of Washington’s 2Q17 Earnings

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Part 4
Expeditors International of Washington’s 2Q17 Earnings PART 4 OF 7

Why EXPD’s Ocean Freight Segment’s Revenues Rose in 2Q17

EXPD’s Ocean Freight segment

In this article, we’ll consider Expeditors International of Washington’s (EXPD) Ocean Freight and Ocean Services vertical. EXPD’s 2Q17 revenues for its Ocean Freight and Ocean Services segment rose 14% to $528.5 million from $464.7 million in 2Q16. The segment’s net revenues increased 1% in 2Q17 compared with 2Q16.

Why EXPD’s Ocean Freight Segment’s Revenues Rose in 2Q17

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Why net revenues rose in 2Q17

Ocean freight consolidation represents the largest component of EXPD’s Ocean Freight net revenues. Ocean freight consolidation net revenues declined 10% in 2Q17 on a year-over-year basis. The fall was mainly due to lower net revenues per container.

However, direct ocean freight forwarding’s net revenues jumped 11% in 2Q17, driven by increased volumes. Higher volumes from North Asia’s new and existing customers led a 16% rise in order management’s net revenues in 2Q17.

Net revenues in EXPD’s North America Ocean Freight and Ocean Services segment declined 4% in 2Q17. Lower ocean freight consolidation resulting from reduced imports margins led the slump in its net revenues.

Europe’s net revenues contracted 10% due to reduced net revenue per container. Similarly, South Asia’s net revenues fell 7% owing to lower net revenues per container.

However, North Asia’s net revenues expanded 12% in 2Q17. Higher order management and direct ocean forwarding revenues led the rise in North Asian net revenues.

Management insights

Expeditors International of Washington (EXPD) anticipates the volatility in pricing to continue in 2H17. The company also expects to see price volatility due to changing market conditions along with liquidity issues for carriers. This, in turn, could reduce the margins going forward.

ETF investment

The SPDR S&P Transportation ETF (XTN) invests in US transportation and logistics companies. Investors bullish on logistics companies can consider investing in XTN. This ETF holds 39.3% and 25.3% in US major airlines (DAL) and key trucking (XPO) (JBHT) companies, respectively.

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