Expeditors International of Washington Inc. (EXPD), one of the leading third-party logistic (3PL) providers, is slated to release its first quarter 2012 results on Wednesday, May 2. The current Zacks Consensus Estimate for first quarter earnings is pegged at 37 cents per share, representing annualized growth of negative 12.24%.
Expeditors' fourth quarter financial results missed the Zacks Consensus Estimate and also deteriorated from the year-ago level. A lackluster revenue performance across most of its segments was responsible for the downfall.
Total revenue for the fourth quarter was also below the year-ago quarter and Zacks Consensus Estimate due to lower-than-expected peak season demand that persisted throughout last quarter.
Agreement of Estimate Revisions
For the first quarter, no upward or downward revision was made by any of the seven analysts in last 7 days. Over the last 30 days, none of the analysts made upward revisions but seven made downward revisions.
For fiscal 2012, no upward revision was made by any of the 13 analysts in last 7 and 30 days. However, one and seven analysts made downward revisions over the last 7 and 30 days, respectively.
For fiscal 2013, out of 12 analysts, none of the analysts made upward or downward movement in last 7days. Over the last 30 days, no upward change was registered, but four analysts moved to the opposite direction.
Given the global economic meltdown that affected the demand trend, analysts remain conservative over the company's earnings expectation. Further, the company has also projected lower earnings in the range of 35-37 cents per share. This represents a decline from Expeditors' fourth quarter adjusted earnings of 43 cents a share.
We believe that uncertainty over air and ocean freight businesses is likely to restrict volume growth in the ongoing quarter. Further, lower demand from the Asian market will continue being a significant headwind. Going forward, the rising freight rates by third party carriers also represent another drag over the near-term margin performance of the company.
Magnitude of Estimate Revisions
Over the last 7 days, the magnitude of the first quarter estimate revisions remained unchanged at 37 cents but dropped by 6 cents (from 43 cents) over the last 30 days.
For fiscal 2012, the Zacks Consensus Estimate, currently at $1.90, remained unchanged over the last 7 days but dropped 7 cents (from $1.97) over the last 30 days.
For fiscal 2013, the Zacks Consensus Estimate remained static over the last 7 days at $2.17 but fell 5 cents (from $2.22) over the last 30 days.
With respect to earnings surprise, over the trailing four quarters, Expeditors has outperformed the Zacks Consensus Estimate, with the average being at 0.67%.
The earnings surprise for the to-be-reported quarter is expected to be 0.0%. For fiscal 2011 and 2012, the Zacks Consensus Estimates' downside risk is measured at 3.16% and 1.84%, respectively.
We remain encouraged by the company's best-in-class position in the 3PL market. We expect Expeditors to benefit from growing supply chains and capacity constraints in the freight market, thereby supporting pricing gains.
Further, the company's debt-free balance sheet is encouraging and provides flexibility for internal growth. Over the long-term, Expeditors is poised for growth as it plans to expand its presence and operations internationally as well as invest in new opportunities and services.
However, intense competition from major rivals like United Parcel Service Inc. (UPS) (see the analyst report here), and dependence on asset-based transportation providers may hinder its profitability over the long-term.
We are currently maintaining our long-term Neutral recommendation on Expeditors International. The company retains a Zacks #4 Rank (Sell).