Expeditors flies high in 3Q17

For what seemed like forever, US-based forwarder Expeditors reliably produced financial and operating results that were the envy of the industry. In fact, it is not much of a stretch to say that Expeditors’ margins would be the enviable in just about any industry. But last year, a bit of the shine came off. Despite steadily increasing air and ocean volumes, Expeditors reported a 6% decline in net income, and margins were not as incredibly high as usual. That pattern continued in the first half of 2017, with profit continuing to fall, down 3% y-o-y in the first quarter, and 6% in the second.

We should make clear that a slight decline in net profit does not mean the company was reporting losses. Expeditors continued to be a very profitable business – just not quite as much so as in the past.

But that all changed in the third quarter, with Expeditors reporting net income up 11.7% y-o-y to $121 million, as net revenue rose 9.9% to $599 million. Operating income for the quarter was up 11.7% to $189 million. And any worries about margins declining were firmly set to rest as the company reported a net margin of 31.2%.

Looking at the results by division:

Airfreight Services: Air freight volumes were up 12% in the quarter, but, more interesting than the total, is the fact that the volume growth accelerated quite dramatically as the quarter progress – up 7% in July, 10% in August, and 17% in September. Air freight forwarding net revenue did not grow as strongly as volumes, up 5.8% to $188 million.

Ocean Freight and Ocean Services: Ocean freight volumes were up 4% in the quarter, but tracked in the opposite direction to air volumes, with the strongest gain coming in July (6%), while August and September were up 2% and 3%, respectively. Net revenue from ocean freight forwarding rose strongly, up 12.4% to $152 million.

Customs Brokerage and Other Services: Expeditors’ customs brokerage business also performed strongly, with net revenue up 11.5% to $259 million.

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