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Will Low Volumes Weigh on Expeditors’ (EXPD) Q4 Earnings? – February 13, 2020

Expeditors International of Washington, Inc. (EXPD Free Report) is scheduled to report fourth-quarter 2019 results on Feb 18.

The Zacks Consensus Estimate for fourth-quarter earnings has been revised approximately 2% downward in the past 60 days. Given this bleak backdrop, let’s take a look at the factors that might have impacted the company’s quarterly performance.

With Expeditors’ exposure in China, the Sino-US trade tensions are expected to have weighed on its volume of shipments as has been the case over the last few quarters. The low shipment volumes are likely to get reflected on Airfreight Services revenues, its primary unit, as well as on air freight revenues from North Asia. Evidently, the Zacks Consensus Estimate for Airfreight Services revenues indicates a 13.2% decline from the year-ago reported figure.

According to the company’s president and CEO Jeffrey S. Musser, factors like “slowing of various global economies, trade disputes and a customer base that is taking advantage of a market that appears to be changing from a supply and demand standpoint” are likely to have dented the company’s fourth-quarter performance. Consequently, the company estimates operating income to have been between $177 million and $183 million in the fourth quarter, hinting at a decline from $217 million reported in the fourth quarter of 2018. Additionally, earnings per share are expected to have been in the range of 78-81 cents, implying a fall from $1.02 reported a year ago.

However, the company’s Ocean Freight and Ocean Services as well as Customs Brokerage and Other Services segments are likely to have put up a good show in the fourth quarter. While increased ocean freight container volumes are likely to have boosted revenues at the Ocean Freight and Ocean Services unit, the company’s growing customs brokerage and import services are expected to have driven revenues at the Customs Brokerage and Other Services division.

Notably, the Zacks Consensus Estimate for Ocean Freight and Ocean Services revenues suggests a 4.7% rise from the fourth quarter of 2018. The same for Customs Brokerage and Other Services revenues implies an 11.7% increase from the prior-year reported figure.

Earnings Whispers

Our proven model does not conclusively predict a beat for Expeditors this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Expeditors has an Earnings ESP of 0.00% as both the Zacks Consensus Estimate and the Most Accurate Estimate are pegged at 80 cents.

Zacks Rank: Expeditors carries a Zacks Rank #4 (Sell).

Highlights of Q3 Earnings

In the last reported quarter, Expeditors delivered a positive earnings surprise of 2.2%. Meanwhile, the bottom line was flat on a year-over-year basis. Total revenues missed the Zacks Consensus Estimate and also dipped year over year. Results were affected by low air freight revenues.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Azul S.A. (AZUL Free Report) , Frontline Ltd. (FRO Free Report) and Gol Linhas Aereas Inteligentes S.A. (GOL Free Report) as these stocks possess the perfect mix of elements to beat on earnings in their next releases.

Azul has an Earnings ESP of +16.13% and a Zacks Rank #1. The company will release fourth-quarter earnings numbers on Mar 12. You can see the complete list of today’s Zacks #1 Rank stocks here.

Frontline is a #1 Ranked company and has an Earnings ESP of +41.18%. This company will announce fourth-quarter earnings numbers on Feb 28.

Gol Linhas has an Earnings ESP of +16.88% and a Zacks Rank #2. The company will report fourth-quarter earnings on Feb 20.

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Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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