Expeditors earnings fall 46% in 2023

Expeditors today reported $9.3 billion in revenue for 2023, a decrease of 46% year over year. THE BIG PICTURE: Like other forwarders in the air cargo industry, Expeditors was impacted in the fourth quarter and 2023 by high capacity and low demand, which drove down rates. Part of the blame was also attributed to the shaky geopolitical situation in the Middle East . [caption id="attachment_98641" align="alignright" width="300"] (Courtesy/Expeditors)[/caption] “If I had to use one keyword to describe the fourth quarter and all of 2023, it would be ‘uncertainty,’” Expeditors President and Chief Executive Jeffrey S. Musser said in today’s earnings release. BY THE NUMBERS: Expeditors reported $2.3 billion in Q4 revenue, down 34% YoY. Also in Q4: Diluted net earnings attributable to shareholders per share fell 21% YoY to $1.09; Airfreight tonnage volume decreased 3% YoY and ocean container volume decreased 10% YoY; and Airfreight services revenue was $866.1 million, down 28.1% YoY. In full-year 2023: Diluted net earnings attributable to shareholders per share fell 39% YoY to $5.01; and Airfreight services revenue was $3.2 billion, down 44.9% YoY. The large drops in airfreight revenue were only part of Expeditor’s downward momentum in Q4 and 2023. Maritime revenue fell even more steeply. Ocean freight and services revenue was $511 million in Q4, down 54.5% YoY, and $2.4 billion for full-year 2023, down 63.9% YoY. The company also took a hit in customs brokerage revenue. WHAT THEY’RE SAYING: Expeditors executives said the company needs to do a better job of reducing expenses where possible while laying the groundwork for future needs. “We are not as efficient as we need to be for the current environment of excess capacity, weak demand, soft rates and economic uncertainty,” Chief Financial Officer Bradley S. Powell said in the release. “ We continue to be focused on further aligning headcount and overhead expenses with lower levels of transactions and volumes. At the same time, we recognize the need to be prepared when tonnage and volumes eventually begin to trend upward in a rate environment that is less volatile.” STATE OF PLAY: Disruptions in the Red Sea , where Houthi rebels have been firing on vessels since October, continue to affect air and ocean freight. “While ocean and air markets have been recovering from the massive disruptions brought on by the global COVID-19 pandemic, we continue to face further market uncertainty due to the current conflicts in the Middle East and on the Red Sea,” Musser said. “Further, volumes and capacity have remained uncertain due to additional capacity recently brought into the marketplace, while shippers have cautiously sought to avoid overextending their inventory levels.” FLASHBACK: Expeditors ranked fifth on Air Cargo Next ’s Power 25 list of top freight forwarders, which is based on 2022 tonnage. Expeditors ranked fifth the year before, as well. NOTEWORTHY: Expeditors ended 2023 with 18,452 full-time employees, a reduction of 1,850, or 9.1%, from 2022, according to its earnings release. The only sector of the company’s operations that didn’t reduce headcount was Information Systems, which added 86 employees, or 7.3%. “Despite reducing headcount in each quarter of 2023 and bringing costs down both sequentially and year over year, expenses are still high when compared to our efficiency target and we are working to bring expenses down further,” Powell said in the release. “Even though compensation, our largest and most variable expense, is 20% lower than the same quarter a year ago, just about everything else is more expensive.” However, the company cannot continue cutting headcount heavily without sacrificing its services to customers, Musser said. “Compensation remains our second largest expenditure behind freight costs and is the area where we know we can have the largest impact from the standpoint of controlling expenses,” he said. “We should again caution that our business is service-based, and we rely on highly skilled individuals to support our customers. History tells us that global trade operates in cycles and that we have periods when global volumes decline, as well as periods when global volumes grow. “We’ve seen a year of declines in 2023, but we need to work hard to ensure that we have the right level of staffing to handle market increases and our expected growth in market share as we move forward,” he said. MARKET REACTION: Shares of Expeditors (NYSE: EXPD) were down 6.88% from market open to $115.62 as of market close today. Expeditors has a market capitalization of $16.8 billion. Register here for Air Cargo Next ’s free webinar, “The Role of Drones in the Future of Air Cargo,” on Tuesday, March 26, at 11 a.m. ET.

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