Expeditors International of Washington Inc. (EXPD), a third-party logistics provider, saw an earnings decline in fourth quarter 2011. Adjusted earnings of 43 cents per share missed the Zacks Consensus Estimate of 47 cents and deteriorated from 45 cents earned in the year-ago quarter. A lackluster revenue performance across most of its segments was responsible for the drop.
Net income attributable to shareholders declined 4% year over year to $92.8 million in the reported quarter.
However, adjusted earnings for fiscal 2011 increased 13% year over year to $1.79 per share. Net income attributable to shareholders registered a 12% growth year over year to $385.7 million.
Total revenue for the reported quarter decreased 5% year over year to $1.5 billion missing the Zacks Consensus Estimate of $1.7 billion owing to lower than expected peak season demand that persisted through out the reported quarter. Total revenue for fiscal 2011 grew 3% year over year to $6.2 billion.
On a year-over-year basis, 4Q11 revenues in United States, Other North America, Latin America, Europe and Africa, increased 3.2%, 11.4%, 4.1%, and 6.2%, respectively, while revenues from Asia and Middle East and India, decreased 12% and 10.4% respectively.
Quarterly gross profit increased 5% year over year to $476.2 million, resulting in gross margin (yield) of 31.7%, up from 28.7% in the year-ago quarter.
Gross profit in the full year was $1.9 billion, up 12% year over year, resulting in gross margin of 30.8%, up from 28.4% a year ago.
Operating income climbed 4% year over year to $155.1 million and operating expenses decreased 6% year over year to $1.3 billion in the reported quarter. The year-over-year growth in the operating income signifies operating efficiency and strong cost control measures undertaken by the company. In fiscal 2011, operating income increased 13% year over year to $618.3 million and operating expenses were $5.5 billion, up 2% year over year.
Revenue Segments
Airfreight Services revenue plunged 9.2% year over year to $705 million in the fourth quarter.
Ocean Freight and Ocean Services revenue declined 8.3% year over year to $441 million.
Customs Brokerage and Other Services revenues climbed 10% year over year to $355 million.
Liquidity
Expeditors’ balance sheet remained solid with no debt and $1.3 billion in cash and cash equivalents at the end of fiscal 2011, up from $1.1 billion at year-end 2010.
Our Analysis
Despite the seasonality impacts dampening fourth quarter results, the company managed to register growth in the full year improvement in global trade, productivity and growing presence in international trade. Further, the company enjoys a debt-free balance sheet while maintaining its ability to return cash to shareholders in the form of dividends make it attractive for investment.
However, competitive threats from companies like United Parcel Service Inc. (UPS) as well as dependence on asset-based transportation providers keep us cautious on the stock for the long term. Hence, we are currently maintaining our long-term Neutral recommendation on Expeditors International with a Zacks #3 Rank (Hold).
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