Expeditors International of Washington’s EXPD efforts to reward shareholders and acquisition of Fleet Logistics’ Digital Platform are impressive. However, the company faces challenges from declining airfreight and ocean container volumes, weak demand and falling rates.

Factors Favoring EXPD

Expeditors impresses with shareholder rewards, including dividend hikes of 15.5% in 2022 and 3% in 2023, along with active share repurchases. The company actively repurchases shares, buying back 4.6 million shares during the pandemic, 4.4 million in 2021, 14.5 million in 2022 and 12.1 million in 2023.

Expeditors is cutting costs to address the soft demand, aiming for further reductions amid the freight downturn. Management highlighted a positive development that compensation, its largest and most variable expense, came down significantly in 2023 on a year-over-year basis.

Expeditors' strong current ratio (a measure of liquidity) of 2.02 in the fourth quarter of 2023 is a positive sign, showing that the company has enough short-term assets to cover its liabilities.

Key Risks

Expeditors is impacted by declining air-freight tonnage and ocean container volumes due to weakened demand and falling rates. This trend, seen over several quarters, includes a 3% decrease in airfreight tonnage and a 10% drop in ocean container volumes year over year in the December quarter. Ongoing tensions in the Red Sea exacerbate EXPD's headwinds.

High capital expenditures during weak demand raise concerns. Despite this, 2023's capex of $39.3 million exceeded the 2021 levels. Projections for 2024 anticipate a substantial increase to $100 million. Such upfront costs strain EXPD's finances and cash flow, especially in the short term.

Although Expeditors recovered from the cyberattack in February 2023, such incidents disrupt operations and incur significant costs. With an artificial intelligence-dominated world and cyberattacks becoming more sophisticated and harder to detect, the risk of recurrence is undesirable.



Zacks Rank

EXPD currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the broader Transportation sector may consider stocks like Delta Air Lines DAL and Air Lease AL. Each stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DAL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The average beat is 3.02%. Strong air travel demand and shareholder-friendly efforts are boosting DAL’s revenues.

The Zacks Consensus Estimate for 2024 earnings has been revised 0.15% upward over the past 60 days. The company has an expected earnings growth rate of 4.96% for 2024. Shares of DAL have rallied 38.4% in the past year.

Air Lease is benefiting from the continuous growth in its fleet and an increase in sales activity. The Zacks Consensus Estimate for AL’s 2024 earnings has improved 25.80% over the past 60 days. Shares of Air Lease have risen 28.3% in the past year.

AL has an expected earnings growth rate of 29.96% for 2024. The company delivered a trailing four-quarter earnings surprise of 20.15%, on average.

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