A “pristine” balance sheet, an increasingly sunny outlook from management, and a focus on costs and margin improvement are indications that Expeditors International is poised for a strong end of the year, according to analysts at BB&T Capital Markets.
Customers have said they will start shipping more during the second half of the year, and BB&T analysts think Expeditors will pick up on some of the business that left their company when they were getting undercut on pricing.
Driving this business is a better overall transportation outlook. Analysts see positive signs in the airfreight market and foresee that Expeditors could post double-digit growth in air cargo volumes throughout the year. The company will also benefit from the upward trend in trade within Asia.
“Given the lack of land infrastructure in many Asian countries, particularly China, companies like Expeditors should continue to benefit from intra-Asia airfreight growth,” analysts wrote in a guidance report.
Finally the current tick up in semiconductor sales is good news for Expeditor’s airfreight business. BB&T estimates that 30 percent of Expeditors’ net revenue is related to the tech sector.
On the ocean side, analysts noted that it is still a very challenged market, but hope that the bottom is near. Expeditors' low ocean numbers reflect weak retail trends, they wrote. But hope is around the corner.
“In recent weeks, freight rates on most of the world’s major trade routes have pulled back as the market has yet to find a balance between supply/demand, as evidenced by the recent roller coaster ride in spot-market rates,” according to the analysts. “However, ocean carriers have been parking capacity, resulting in a challenging yield environment. With steamship lines anchoring vessels and eliminating strings, we think carriers will continue to push pricing (particularly on the Asia/U.S. trade lane).” - Jon Ross