US-based forwarder and logistics services provider Expeditors International of Washington, Inc., transported significantly more air and ocean freight during 4Q16, compared to 4Q15, with volumes for both up 12% y-o-y. Despite higher volumes, net income was down 3.4% y-o-y, to $111 million. The larger volumes elevated net revenues, which rose 2.3% to $549 million, though operating income for the quarter dropped 3.2% to $172 million.
Annual comparisons are tough for a company that has consistently reported double-digit gains in recent quarters. The inverse relationship between growing volumes and falling net revenues for air and ocean freight indicate rate-cuts may have been responsible for much of the volume growth. Other influences such as the bankruptcy of South Korea’s Hanjin in Q2 likely led to greater rate volatility which continued into Q4.
Commenting on the quarter, CEO Jeffrey Musser said, “Rates remained highly unpredictable in the quarter, as they were throughout much of 2016, again putting unusual pressure on our margins. While experience has shown us that margin pressure is cyclical, in light of such truly unprecedented rate volatility, we are improving processes to better address the rapid changes in buy and sell rates which we expect to continue.” Musser also added that with increasing economic uncertainty, Expeditors would work to expand its presence in more stable markets.
For the full year, Expeditors reported net income down 5.8% to $431 million, net revenues down 1.1% to $2.16 billion, and operating income down 7.1% to $670 million.
Even with “unusual pressure” on margins in Q4, the company continued to do very well:
- For the fourth quarter, Expeditors’ operating margin (operating income as a percentage of net revenue) was 31.4%, and net margin (net income as a percentage of net revenue) was 20.2%
- For the full year, Expeditors operating margin was 31.0%, and net margin was 19.9%
We point out that most of the world’s top forwarders can only dream of operating margins above 30%. See “where will your operating margins be in 2020” for more comparison.
Those interested in hearing insights from some of the world’s top forwarders are invited to join us at Cargo Facts Asia in Shanghai, 25 – 26 April. To register, or for more information, go to CargoFactsAsia.com.
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