Expeditors’ revenue falls 15%

Expeditors today reported $2.2 billion in revenue for the first quarter of 2024, a decrease of 15% year over year. [caption id="attachment_98641" align="alignright" width="300"] (Courtesy/Expeditors)[/caption] THE BIG PICTURE: Though the company reported a YoY revenue decline, it is an improvement from Q4 2023, when the company’s YoY revenue decline was 34%. Freight forwarders and cargo airlines generally fared poorly in 2023 — Expeditors reported $9.3 billion in 2023 revenue, down 46% YoY — but are seeing signs of recovery in Q1 as rates begin to normalize. BY THE NUMBERS: Expeditors’ operating income in Q1 was $214.8 million, down 22% YoY. The freight forwarder also reported in Q1: Net earnings attributable to shareholders of $169.2 million, down 25% YoY; Diluted earnings attributable to shareholders per share of $1.17, down 19% YoY; Airfreight services revenue of $759.4 million, down 16.1% YoY; Ocean freight and services revenue of $570.8 million, down 18.1% YoY; and Customs brokerage and other services of $876.5 million, down 11.5% YoY. Air cargo tonnage rose YoY: Six percent in January; Six percent in February; One percent in March; and Four percent in Q1. WHAT THEY’RE SAYING: Executives attributed the company’s revenue decline to: Geopolitical conflict , such as the Russia-Ukraine and Israel-Hamas wars; Inflation; and High c apacity coupled with low demand. “Since late 2022, we have been adjusting operations to align with a broad marketplace reset,” President and Chief Executive Jeffrey S. Musser said in the earnings report. “While we are no longer experiencing anything like the widespread supply chain chaos of the pandemic, our industry remains volatile due to global conflicts, stubborn inflation, fragile economies and uncertain demand. STATE OF PLAY: Though air and ocean cargo volumes increased in Q1, they did not provide a revenue boost due to lower rates. “Air tonnage and ocean volumes increased when compared to a sluggish first quarter a year ago and breaking from a general downward slide of more than a year,” Musser said. “At the same time, and despite those conditions, both air and ocean carrier capacity continue to grow, further pressuring rates that have already come down significantly from their peaks. “The air market continues to add capacity, as profit-minded carriers carefully grow capacity to meet strong passenger demand, particularly for international travel, which has negatively impacted air cargo rates and our profit-per-kilo,” he said. FLASHBACK: Expeditors ranked fifth on Air Cargo Next ’s Power 25 list of top freight forwarders based on 2022 tonnage. Expeditors ranked fifth the year before, as well. NOTEWORTHY: The company attempted to keep costs down by “keeping headcount and other costs in check,” Musser said. As of March 31, the company employed 18,403 people, down 1,278 from March 31, 2023, according to the earnings report. “We reduced headcount by 7%, largely through attrition, as we remain focused on aligning headcount with tonnage and volumes shipped,” Chief Financial Officer Bradley S. Powell said in the earnings report. “The only area of increased headcount during the quarter was in information systems, as we continue to enhance and bolster our network security.” As of March 31, there were 1,286 employees in information systems, up 61 from March 31, 2023. THE BOTTOM LINE: “Our ability to see much beyond our day-to-day levels of activity remains very difficult,” Musser said. “As capacity is growing and rates are falling, events such as the Red Sea circumvention , the Baltimore bridge collapse and low water levels in the Panama Canal continue to make the global freight market highly unpredictable. If current conditions represent something like a new normal for our industry, then I would say we are adapting very well.” MARKET REACTION: Shares of Expeditors ( NYSE: EXPD ) were down 0.7% from market open to $114.83 as of market close today. The company has a market capitalization of $16.53 billion.

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