Expeditors faces challenging pricing environment in 2Q

Despite transporting near record volumes of both air and ocean freight during 2Q17, Expeditors International of Washington, Inc., reported a 6.6% y-o-y drop in net income for the quarter, to US$109 million on “unfavorable pricing.”

Air freight volumes jumped 9%, while ocean container volumes rose 4% y-o-y during 2Q17. Larger volumes boosted gross revenues 13.4% higher, to $1.67 billion. Expenses however, rose much faster than gross revenues, resulting in net revenue that was only 1.9% higher in the second quarter, at $564 million.

The current pricing environment is a shared predicament among forwarders. Even though business is booming, and capacity is tight, shippers have shown resistance to price hikes.  Jeffrey Musser, President and CEO said, “Global demand for air and ocean capacity continues to be stronger than we have seen in the past few years, which has led to a scarcity of favorable pricing.” In response to the capacity-strained market, Expeditors said it began raising rates on “certain high-volume lanes” beginning in June.

Regardless, Expeditors continues to outperform most of its peers, and has once again reported impressive margins. Operating margin (operating income as a percentage of net revenue), rose 1.9 points to 29.8%, edging closer to the company’s 30% benchmark. Net margin (net income as a percentage of net revenue) meanwhile, was 19.3%.

Join us at the Cargo Facts Symposium in Miami, 2 – 4 October, to see how the third quarter played out, and hear thoughts about the future from senior executives from all branches of the air freight industry. To register, or for more information, go to CargoFactsSymposium.com.