A record quarter for Expeditors

US-based forwarder and logistics services provider Expeditors International reported third-quarter net income up 15.5% y-o-y to a $119 million, as net revenue increased 11.1% to $570 million. Operating income for the quarter was up 20.6% to $192 million.

As was the case in the second quarter, all three metrics – net income, net revenue, and operating income – were records for the company, and came against the background of a sluggish world economy and stagnant demand for air and ocean shipping.

These gains, as impressive as they seem at first glance, are even more significant given that Expeditors has long been the most profitable of the world’s big forwarders, so year-over-year comparisons are always tough.

How profitable is Expeditors? Third-quarter operating margin (operating income as a percentage of net revenue) was a record 33.7%, and net margin (net income as a percentage of net revenue) was 20.8%. To put these margins in perspective, consider that Kuehne + Nagel, generally regarded as a very well run and profitable forwarder, reported third-quarter operating and net margins of 14.5% and 11.7%, respectively.

Looking at Expeditors’ results by business segment:

• Air freight forwarding: Net revenue from air freight forwarding was up 15.3% in the second quarter to $195 million, as tonnage rose 3%. Operating margin rose 4.9 points to 29.6%

• Ocean freight forwarding: Net ocean forwarding revenue was up 15.1% to $144 million despite volume staying flat with 3Q14. Operating margin for ocean freight forwarding activity was up 4.9 points to 25.7%

• Customs brokerage and other services: Net revenue in this segment was up 5.4% to $231 million, and, as profitable as Expeditors’ forwarding business is, it pales when compared to the customs brokerage arm of the business, which saw second-quarter operating margin increase 1.1 points to 53.4%.

For the first nine months of 2015, Expeditors’ net income was up 23.6% to $344 million, as net revenue rose 12.9% to $1.65 billion. Operating income for the period was up 24.4% to $543 million. Margins for the first nine months were similar to margins in the third quarter: Airfreight operating margin was up 3.1 points to 28.0%, ocean freight margin was up 2.8 points to 23.9%, and customs brokerage margin was up 0.5 points to 53.1%. Overall operating margin for the first three quarters of 2015 was up 3.0 points to 32.9%, and net margin increased 1.8 points to 20.9%.