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How EXPD’s Customs Brokerage Segment Fared in the Second Quarter

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EXPD’s Customs Brokerage segment

In the previous part of this series, we looked at Expeditors International of Washington’s (EXPD) Ocean Freight and Ocean Services segment. Now we’ll evaluate the performance of its Customs Brokerage and Other Services segment. In the quarter, the segment’s gross revenue rose 32.6% to $625.7 million, from $471.8 million in Q2 2017.

The segment’s net revenue grew 16.4% in the second quarter to $289.2 million, from $248.5 million in Q2 2017.

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Customs Brokerage revenue growth

The robust second-quarter growth in the Customs Brokerage segment’s revenue was mainly driven by higher shipments in customs brokerage, road freight and warehouse, and distribution services. In 2018, Expeditors changed its presentation of certain warehouse and distribution revenue from a net to a gross basis. That resulted in a rise in both revenue and operating expenses by ~$50 million in the second quarter.

The segment’s net revenue growth in the second quarter was fueled by higher customs brokerage and increased road freight and distribution shipments. The rise in these shipments was specifically noted in North America, Europe, and North Asia.

Now let’s look at the Customs Brokerage segment’s net revenue by geography. North Asia’s net revenue rose a robust 42% YoY in the quarter, while Europe and North America had 34% YoY and 11% YoY net revenue growth, respectively.

Management outlook

EXPD hopes the Customs Brokerage segment’s revenue growth will continue in the second half of 2018. It believes that customers will look for carriers with global footprints and state-of-the-art technological capabilities essential for a complete logistics management program.

Major truckload (XLI) carriers J.B. Hunt Transport (JBHT) and Werner Enterprises (WERN) reported higher YoY volumes in the second quarter. Less-than-truckload sector carriers Old Dominion Freight Lines (ODFL) and SAIA (SAIA) also witnessed increased volumes in the quarter compared to Q2 2017.

In the next part, we’ll look at the rise in EXPD’s operating margin in the second quarter.

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