Expeditors International of Washington Inc. (EXPD), a third-party logistics provider, reported robust growth in first quarter 2011. Adjusted earnings were 42 cents per share, ahead of the Zacks Consensus Estimate of 37 cents. Earnings per share shot up 50% from 28 cents in the year-earlier quarter on strong growth across all segments owing to market share gains.

Net income attributable to shareholders jumped 49% year over year to $91.2 million in the reported quarter.

Total revenue increased year over year to $1.5 billion, surpassing the Zacks Consensus Estimate of $1.4 billion on growing market share.

On a year-over-year basis, revenues in United States, Other North America, Latin America, Asia, Europe and Africa, Middle East and India, increased 31.2%, 24.3%, 30.0%, 14.4%, 32.1% and 22.8%, respectively.

Gross profit increased 25% year over year to $453.9 million, resulting in gross margin (yield) of 31.1%, up from 30.1% in the year-ago quarter.

Operating income climbed 46% year over year to $147.2 million and operating expenses increased 19.4% year over year to $1.3 billion in the reported quarter. The whopping growth in the operating income signifies operating efficiency and strong cost control measures undertaken by the company.

Revenue Segments

Airfreight Services revenue leaped 25.3% year over year to $701 million in the first quarter.

Ocean Freight and Ocean Services revenue grew 15.4% year over year to $440 million.

Customs Brokerage and Other Services revenues climbed 22.8% year over year to $320 million.


Expeditors’ balance sheet remained solid with no debt and $1.2 billion in cash and cash equivalents at the end of first quarter, up from $1.1 billion at year-end 2010.

Our Analysis

We believe Expeditors is focused on gaining market share as well as increasing operational efficiency. The company’s strong balance sheet with no debt is encouraging and provides flexibility for internal growth. Over the long term, Expeditors is expected to expand its international operations and is investing in new opportunities and services.

However, the company’s dependence on asset-based transportation providers may hinder its profitability in the long term. Additionally, it might encounter competitive threats from companies like United Parcel Service Inc. (UPS), which provides logistic services. Hence, we are currently maintaining our long-term Neutral recommendation on Expeditors International with a Zacks # 2 (Buy) Rank.

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