Expeditors International of Washington Inc. (EXPD), a third-party logistics provider, reported its adjusted fourth quarter earnings of 45 cents per share, in line with the Zacks Consensus Estimate. Earnings per share shot up 41% year over year from 32 cents on strong volumes.
Adjusted earnings for fiscal 2010 increased 43% year over year to $1.59.
Net income attributable to shareholders jumped 40% year over year to $96.5 million in the reported quarter. In fiscal 2010, net income attributable to shareholders increased 43% to $344.2 million from $240.2 million in 2009.
Total revenue in the reported quarter was $1.6 billion, up 27% year over year, but was well below the Zacks Consensus Estimate of $1.7 billion. In 2010, revenue increased 46% year over year to $5.9 billion.
On an annualized basis, revenues in United States, Other North America, Latin America, Asia, Europe and Africa, Middle East and India, increased 32.7%, 16.1%, 18.7%, 27.0%, 22.4%, 37.3% and 22.5%, respectively, in the fourth quarter.
Gross profit increased 23% year over year to $453.4 million in the fourth quarter, resulting in gross margin (yield) of 28.7%, down from 29.7% in the year-ago quarter. Gross profit for 2010, increased 22.0% year over year to $1.69 billion resulting in gross margin of 28.4%, down from 33.8% in 2009.
Operating income climbed 35% year over year to $148.6 million and operating expenses expanded 26.1% year over year to $1.4 billion in the reported quarter. For the full year, operating income increased 42% year over year to $547.2 million and operating expenses increased 46.2% year over year to $5.4 billion.
Revenue Segments
Airfreight Services revenue leaped 23.9% year over year to $778 million in the fourth quarter.
Ocean Freight and Ocean Services revenue saw a whopping 38.2% year-over-year increase to reach $481.3 million in the reported quarter.
Customs Brokerage and Other Services revenues climbed 19.4% year over year to $322.9 million in the fourth quarter.
Liquidity
Expeditors’ balance sheet remained solid with no debt and $1.1 billion in cash at the end of 2010, up from $925.9 million at year-end 2009.
Our Analysis
We believe Expeditors’ is poised to grow both by gaining market share as well as by expanding its presence in international trade. 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 invests 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 the Zacks #2 Rank.
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