Full throttle at Expeditors

It was double-digit gains almost everywhere for US-based forwarder and logistics services provider Expeditors International.

Expeditors 3Q14Expeditors reported third-quarter net income up 10.9% y-o-y to $103 million as net revenue (what European forwarders call gross profit) rose 5.8% to $513 million. Operating income for the quarter increased 8.8% to $159 million. The revenue and income increases in the quarter were driven by double-digit growth in both air and ocean volumes, with airfreight tonnage up 12% and ocean freight volume (in FEUs) up 11%. It is worth noting that the volume gains increased steadily over the three months of the quarter, from 11% and 9% for air and ocean, respectively, in July to 15% and 12% in September.

Commenting on the strong overall performance, CEO Jeffrey Musser pointed out some regional differences: “We experienced strong operating income growth in both the United States and Euorpe regions, which again compensated for relative weakness in the Asia Pacific and Middle East and India regions.”

Looking ahead to the fourth quarter, Mr. Musser (sounding very much like his mentor, former CEO Peter Rose) said: “We are taking these third quarter results in stride. As we’ve said for years, trying to predict trends in these very fast changing air and ocean freight markets is futile. While heartened by the strength of ocean freight in the third quarter, so much of how the fourth quarter will turn out will depend on circumstances that are still playing out in the airfreight markets. Airfreight pricing is still very volatile.” Highlighting the differences between the third and fourth quarters, he added: “ New product launches and increases in global demand certainly played out well in the third quarter. The fourth quarter, with less seasonal ocean freight and more airfreight emphasis, has many more dynamics for us to manage. We are also keenly aware of the well-reasoned concerns about the state of the global economy.”

Forwarder comparisonWhile many of the world’s big forwarders have not yet published their third-quarter results, it is interesting to compare three that have. The chart at right shows some of the key financial and operating data reported by Expeditors, Kuehne+Nagel, and Panalpina – all top-ten players. All three have seen volume increases, but whereas net revenue for both air and ocean rose on a year-over-year basis at K+N and Expeditors, Panalpina reported declines. However, despite its struggle to convert volume increases into gains in net revenue, Panalpina did report a 5.7% in net income – not as large an increase as the 9.2% and 10.9% reported by K+N and Expeditors, respectively, and from a much smaller base, but nonetheless a move in the right direction.

When it comes to converting business into profit, however, Expeditors is in a world of its own, with an operating margin of 31% and a net margin of 20%.

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