Expeditors Reports Fourth Quarter 2023 EPS of $1.09

Rhea-AI Summary

Expeditors International of Washington, Inc. (NYSE: EXPD) reported a decrease in key financial metrics for the fourth quarter of 2023 compared to the same period in 2022. Diluted Net Earnings per share decreased by 21% to $1.09, Net Earnings decreased by 28% to $159 million, Operating Income decreased by 40% to $199 million, and Revenues decreased by 34% to $2.3 billion. The company cited market uncertainty due to global conflicts and cautious inventory management by shippers as contributing factors.

Positive

• None.

Negative

• Decrease in Diluted Net Earnings per share by 21% compared to the same quarter in 2022
• Decrease in Net Earnings by 28% to $159 million
• Operating Income decreased by 40% to $199 million
• Revenues decreased by 34% to $2.3 billion
• Market uncertainty due to global conflicts and cautious inventory management impacting business operations

Insights

Financial Analyst

The reported decrease in EPS, Net Earnings, Operating Income and Revenues for Expeditors International of Washington, Inc. reflects a significant contraction in the company's financial performance. A 21% drop in EPS and a 28% decrease in net earnings are substantial, indicating a challenging quarter for the company. The 40% decline in operating income suggests that the company's profitability has been heavily impacted, potentially due to decreased demand, reduced shipping volumes and lower freight rates post-pandemic.

From a financial perspective, the reduction in headcount and compensation expenses indicates a strategic move to align costs with the current revenue trajectory. However, the fact that expenses remain high relative to the company's efficiency target suggests that further cost optimization may be necessary. Investors may view these cost-cutting measures as a proactive approach to managing a downturn, but they also raise concerns about the company's ability to scale up operations quickly when market conditions improve.

Market Research Analyst

The logistics industry has faced volatility due to the global pandemic and geopolitical tensions, as mentioned by the CEO. The reported declines in airfreight tonnage and ocean container volume align with broader industry trends of normalization following the unprecedented demand during the pandemic. However, the company's mention of market uncertainty due to conflicts in the Middle East and on the Red Sea is a significant factor that could continue to affect supply chains and shipping rates.

The stabilization of ocean rates and increase in air rates in Q4 2023 may suggest a rebalancing of supply and demand in the logistics sector. The cautious approach by shippers to avoid overextending inventory levels is a reflection of the broader economic uncertainty, which could lead to a conservative stance in the near term. Understanding these market dynamics is crucial for stakeholders to anticipate future trends in shipping volumes and rates.

Economist

The company's performance must be contextualized within the larger economic environment. The reference to 'uncertainty' by the CEO captures the essence of the current economic climate. Factors such as global trade cycles and geopolitical issues have a direct impact on companies like Expeditors International. The decline in revenues and volumes is indicative of slower global trade activity, which could be a result of various macroeconomic factors including trade tensions and shifts in consumer demand.

Furthermore, the company's focus on managing expenses while preparing for potential market share growth suggests an anticipation of economic recovery. However, the balance between cost-cutting and investing in growth is delicate. Too much emphasis on reducing expenses could undermine the company's ability to capitalize on market upswings, while inadequate cost management could strain the company's finances if the downturn persists.

SEATTLE--(BUSINESS WIRE)-- Expeditors International of Washington, Inc. (NYSE:EXPD) today announced fourth quarter 2023 financial results including the following highlights compared to the same quarter of 2022:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) decreased 21% to $1.09
• Net Earnings Attributable to Shareholders decreased 28% to $159 million
• Operating Income decreased 40% to $199 million
• Revenues decreased 34% to $2.3 billion
• Airfreight tonnage volume decreased 3% and ocean container volume decreased 10%

“While ocean and air markets have been recovering from the massive disruptions brought on by the global Covid-19 pandemic, we continue to face further market uncertainty due to the current conflicts in the Middle East and on the Red Sea,” said Jeffrey S. Musser, President and Chief Executive Officer. “Further, volumes and capacity have remained uncertain due to additional capacity recently brought into the marketplace, while shippers have cautiously sought to avoid overextending their inventory levels. These factors created an environment where rates, which had fallen fairly significantly from the pandemic period, stabilized in ocean and, in the case of air, increased in the fourth quarter of 2023. If I had to use one key word to describe the fourth quarter and all of 2023, it would be ‘uncertainty.’

“As a company we have continued to remain focused on bringing expenses in line with revenue, as shown by headcount reductions. Compensation remains our second largest expenditure behind freight costs and is the area where we know we can have the largest impact from the standpoint of controlling expenses. We also know that there is more work that we can and will do to control expenses moving forward.

“We should again caution that our business is service-based, and we rely on highly skilled individuals to support our customers. History tells us that global trade operates in cycles and that we have periods when global volumes decline, as well as periods when global volumes grow. We’ve seen a year of declines in 2023, but we need to work hard to ensure that we have the right level of staffing to handle market increases and our expected growth in market share as we move forward. Managing expenses is an important role of any leadership team, but cutting expenses is only one part of effective management. Equally important is the expectation that management will grow the business. We remain committed to both.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Despite reducing headcount in each quarter of 2023 and bringing costs down both sequentially and year-over-year, expenses are still high when compared to our efficiency target and we are working to bring expenses down further. Even though compensation, our largest and most variable expense, is 20% lower than the same quarter a year ago, just about everything else is more expensive. We are not as efficient as we need to be for the current environment of excess capacity, weak demand, soft rates, and economic uncertainty. We continue to be focused on further aligning headcount and overhead expenses with lower levels of transactions and volumes. At the same time, we recognize the need to be prepared when tonnage and volumes eventually begin to trend upward in a rate environment that is less volatile.”

Mr. Powell noted that the Company generated $1.1 billion in cash flow from operations in 2023 and returned $1.6 billion to shareholders in share repurchases and dividends.

Expeditors is a global logistics company headquartered in Seattle, Washington. The Company employs trained professionals in 176 district offices and numerous branch locations located on six continents linked into a seamless worldwide network through an integrated information management system. Services include the consolidation or forwarding of air and ocean freight, customs brokerage, vendor consolidation, cargo insurance, time-definite transportation, order management, warehousing and distribution and customized logistics solutions.

_______________________

1Diluted earnings attributable to shareholders per share.

NOTE: See Disclaimer on Forward-Looking Statements in this release.

Disclaimer on Forward-Looking Statements:

Certain statements contained in this news release are “forward-looking statements,” based on management’s views with respect to future events and underlying assumptions that involve risks and uncertainties. These forward-looking statements include statements regarding uncertainty in the ocean and air markets, including uncertainty due to conflicts in the Middle East and Red Sea; new capacity in the marketplace; cautious shipper demand and variable rate stability. Future financial performance could differ materially because of factors such as: our ability to reduce headcount and to control expenses and bring them in line with revenue; that volumes and tonnage will increase and that we will be able to grow in market share; that management is able to grow the business; that we are able to improve our efficiency; our ability to leverage the strength of our carrier relationships; the strength of our non-asset-based operating model; and our ability to remain a strong, healthy, unified and resilient organization. The normalizing of the supply chain at the end of the pandemic, along with the current uncertainty in the global economy, could have the effect of heightening many of the other risks described in Item 1A of our Annual Report on Form 10-K, including, without limitation, those related to the success of our strategy and desire to maintain historical unitary profitability, our ability to attract and retain customers, our ability to manage costs, interruptions to our information technology systems, the ability of third-party providers to perform and potential litigation as updated by our reports on Form 10-Q, filed with the Securities and Exchange Commission. These and other factors are discussed in the Company’s regulatory filings with the Securities and Exchange Commission, including those in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and the Company’s most recent Form 10-Q. The forward-looking statements contained in this news release speak only as of this date and the Company does not assume any obligation to update them except as required by law.

Expeditors International of Washington, Inc. Fourth quarter 2023 Earnings Release, February 20, 2024 Financial Highlights for the three and twelve months ended December 31, 2023 and 2022 (Unaudited) (in 000's of US dollars except share data)
		Three months ended December 31,										Twelve months ended December 31,
		2023				2022				% Change		2023				2022				% Change
Revenues		$	2,277,768			$	3,441,528			(34)%		$	9,300,110			$	17,071,284			(46)%
Directly related cost of transportation and other expenses 1		$	1,513,604			$	2,425,565			(38)%		$	6,054,000			$	12,576,897			(52)%
Salaries and other operating expenses 2		$	564,766			$	686,257			(18)%		$	2,306,177			$	2,670,016			(14)%
Operating income		$	199,398			$	329,706			(40)%		$	939,933			$	1,824,371			(48)%
Net earnings attributable to shareholders		$	158,719			$	219,276			(28)%		$	752,883			$	1,357,399			(45)%
Diluted earnings attributable to shareholders per share		$	1.09			$	1.38			(21)%		$	5.01			$	8.26			(39)%
Basic earnings attributable to shareholders per share		$	1.09			$	1.39			(22)%		$	5.05			$	8.33			(39)%
Diluted weighted average shares outstanding			145,891				158,535						150,186				164,427
Basic weighted average shares outstanding			144,979				157,269						149,141				163,010
________________ 1Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.
2Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.

During the three and twelve months ended December 31, 2023, we repurchased 1.6 million and 12.1 million shares of common stock at an average price of $119.22 and $114.68 per share, respectively. During the three and twelve months ended December 31, 2022, we repurchased 5.0 million and 14.5 million shares of common stock at an average price of $112.76 and $108.88 per share, respectively. On February 19, 2024 the Board of Directors amended the Discretionary Stock Repurchase Plan to further authorize share repurchases down to 130 million shares of common stock. This authorization has no expiration date. In addition, during 2023 and 2022, we paid cash dividends of $1.38 and $1.34 per share, respectively.

		Employee Full-time Equivalents as of December 31,
		2023				2022
North America			6,864				7,778
Europe			3,791				4,228
North Asia			2,260				2,448
South Asia			1,693				1,851
Middle East, Africa and India			1,428				1,540
Latin America			750				859
Information Systems			1,259				1,173
Corporate			407				425
Total			18,452				20,302

		Fourth quarter year-over-year percentage (decrease) increase in:
		Airfreight kilos		Ocean freight FEU
2023
October		(6)%		(12)%
November		(6)%		(10)%
December		3%		(7)%
Quarter		(3)%		(10)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on February 23, 2024 will be considered in management's 8-K “Responses to Selected Questions.”

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except per share data) (Unaudited)
		December 31, 2023				December 31, 2022
Assets:
Current Assets:
Cash and cash equivalents		$	1,512,883			$	2,034,131
Accounts receivable, less allowance for credit loss of $6,550 and $9,466 at December 31, 2023 and 2022, respectively			1,532,599				2,107,645
Deferred contract costs			218,807				257,545
Other			170,907				118,696
Total current assets			3,435,196				4,518,017
Property and equipment, net			479,225				501,916
Operating lease right-of-use assets			516,280				507,503
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			63,690				37,449
Other assets, net			21,491				17,622
Total assets		$	4,523,809			$	5,590,434
Liabilities:
Current Liabilities:
Accounts payable		$	860,856			$	1,108,996
Accrued expenses, primarily salaries and related costs			447,336				479,262
Contract liabilities			280,909				323,101
Current portion of operating lease liabilities			99,749				95,621
Federal, state and foreign income taxes			15,562				47,075
Total current liabilities			1,704,412				2,054,055
Noncurrent portion of operating lease liabilities			427,984				422,844
Commitments and contingencies
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 143,866 shares and 154,313 shares at December 31, 2023 and 2022, respectively			1,439				1,543
Additional paid-in capital			—				139
Retained earnings			2,580,968				3,310,892
Accumulated other comprehensive loss			(192,057	)			(202,553	)
Total shareholders’ equity			2,390,350				3,110,021
Noncontrolling interest			1,063				3,514
Total equity			2,391,413				3,113,535
Total liabilities and equity		$	4,523,809			$	5,590,434

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Earnings (In thousands, except per share data) (Unaudited)
		Three months ended December 31,								Twelve months ended December 31,
		2023				2022				2023				2022
Revenues:
Airfreight services		$	866,122			$	1,204,810			$	3,246,527			$	5,886,886
Ocean freight and ocean services			511,854				1,124,088				2,363,243				6,544,559
Customs brokerage and other services			899,792				1,112,630				3,690,340				4,639,839
Total revenues			2,277,768				3,441,528				9,300,110				17,071,284
Operating Expenses:
Airfreight services			639,725				899,865				2,347,293				4,359,726
Ocean freight and ocean services			357,788				842,103				1,634,947				5,188,066
Customs brokerage and other services			516,091				683,597				2,071,760				3,029,105
Salaries and related			409,605				509,884				1,700,516				2,056,387
Rent and occupancy			58,134				54,291				232,358				209,532
Depreciation and amortization			21,386				14,922				67,760				57,338
Selling and promotion			9,066				8,119				27,913				24,293
Other			66,575				99,041				277,630				322,466
Total operating expenses			2,078,370				3,111,822				8,360,177				15,246,913
Operating income			199,398				329,706				939,933				1,824,371
Other Income (Expense):
Interest income			16,728				13,107				70,451				25,554
Interest expense			(159	)			(22,245	)			(4,800	)			(23,277	)
Other, net			409				480				9,444				9,243
Other income (expense), net			16,978				(8,658	)			75,095				11,520
Earnings before income taxes			216,376				321,048				1,015,028				1,835,891
Income tax expense			57,231				106,311				263,249				475,286
Net earnings			159,145				214,737				751,779				1,360,605
Less net earnings (losses) attributable to the noncontrolling interest			426				(4,539	)			(1,104	)			3,206
Net earnings attributable to shareholders		$	158,719			$	219,276			$	752,883			$	1,357,399
Diluted earnings attributable to shareholders per share		$	1.09			$	1.38			$	5.01			$	8.26
Basic earnings attributable to shareholders per share		$	1.09			$	1.39			$	5.05			$	8.33
Weighted average diluted shares outstanding			145,891				158,535				150,186				164,427
Weighted average basic shares outstanding			144,979				157,269				149,141				163,010

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three months ended December 31,								Twelve months ended December 31,
		2023				2022				2023				2022
Operating Activities:
Net earnings		$	159,145			$	214,737			$	751,779			$	1,360,605
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses on accounts receivable			1,627				1,133				3,943				11,050
Deferred income tax benefit			(14,974	)			(18,312	)			(22,916	)			(33,240	)
Stock compensation expense			11,437				13,101				58,399				64,397
Depreciation and amortization			21,386				14,922				67,760				57,338
Other, net			2,065				1,108				8,461				1,252
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(55,481	)			711,977				573,724				1,592,341
Increase (decrease) in accounts payable and accrued expenses			11,645				(454,221	)			(300,345	)			(798,123	)
Decrease in deferred contract costs			8,082				277,805				36,952				714,960
Decrease in contract liabilities			(6,527	)			(309,530	)			(40,076	)			(798,356	)
Increase (decrease) in income taxes payable, net			20,445				23,439				(77,298	)			(55,129	)
(Increase) decrease in other, net			(497	)			10,540				(7,192	)			12,580
Net cash from operating activities			158,353				486,699				1,053,191				2,129,675
Investing Activities:
Purchase of property and equipment			(10,714	)			(18,326	)			(39,314	)			(86,824	)
Other, net			90				(245	)			(119	)			(890	)
Net cash from investing activities			(10,624	)			(18,571	)			(39,433	)			(87,714	)
Financing Activities:
Payments on borrowing on lines of credit			(4,507	)			(688	)			(38,143	)			(30,289	)
Proceeds from borrowing on lines of credit			5,246				25,211				32,199				81,756
Proceeds from issuance of common stock			4,584				7,662				84,889				80,980
Repurchases of common stock			(193,592	)			(563,802	)			(1,392,886	)			(1,581,908	)
Dividends Paid			(99,766	)			(103,971	)			(202,029	)			(213,799	)
Payments for taxes related to net share settlement of equity awards			(5	)			(2	)			(19,506	)			(19,335	)
Distributions to noncontrolling interest			(1,089	)			(1,402	)			(1,089	)			(1,945	)
Net cash from financing activities			(289,129	)			(636,992	)			(1,536,565	)			(1,684,540	)
Effect of exchange rate changes on cash and cash equivalents			14,855				48,461				1,559				(51,982	)
Change in cash and cash equivalents			(126,545	)			(120,403	)			(521,248	)			305,439
Cash and cash equivalents at beginning of period			1,639,428				2,154,534				2,034,131				1,728,692
Cash and cash equivalents at end of period		$	1,512,883			$	2,034,131			$	1,512,883			$	2,034,131
Taxes Paid:
Income taxes		$	50,321			$	100,822			$	356,380			$	566,533

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES Business Segment Information (In thousands) (Unaudited)
		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the three months ended December 31, 2023:
Revenues		$	775,382				109,933				45,350				573,020				234,260				422,340				118,670				(1,187	)			2,277,768
Directly related cost of transportation and other expenses1		$	422,015				68,096				27,237				461,029				175,214				276,161				84,391				(539	)			1,513,604
Salaries and other operating expenses2		$	252,715				34,345				17,423				67,098				42,786				120,331				30,707				(639	)			564,766
Operating income (loss)		$	100,652				7,492				690				44,893				16,260				25,848				3,572				(9	)			199,398
Identifiable assets at period end		$	2,595,576				174,509				109,380				449,529				237,470				721,259				256,199				(20,113	)			4,523,809
Capital expenditures		$	8,016				315				82				424				227				1,142				508				—				10,714
Depreciation and amortization		$	15,401				475				281				1,106				460				2,876				787				—				21,386
Equity		$	1,774,874				19,222				54,581				158,329				103,573				167,141				154,038				(40,345	)			2,391,413
For the three months ended December 31, 2022:
Revenues		$	1,118,262				127,442				65,821				969,266				367,679				599,947				194,342				(1,231	)			3,441,528
Directly related cost of transportation and other expenses1		$	639,804				80,052				41,480				799,583				288,014				432,835				144,377				(580	)			2,425,565
Salaries and other operating expenses2		$	(18,767	)			101,864				29,523				178,038				117,024				239,627				39,588				(640	)			686,257
Operating income3		$	497,225				(54,474	)			(5,182	)			(8,355	)			(37,359	)			(72,515	)			10,377				(11	)			329,706
Identifiable assets at period end		$	3,070,697				209,516				123,003				675,022				316,777				938,660				283,872				(27,113	)			5,590,434
Capital expenditures		$	11,262				282				232				1,098				391				4,525				536				—				18,326
Depreciation and amortization		$	9,433				454				280				1,069				472				2,527				687				—				14,922
Equity		$	2,246,417				31,132				56,416				274,703				136,944				263,278				145,269				(40,624	)			3,113,535

		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the twelve months ended December 31, 2023:
Revenues		$	3,311,327				436,331				197,344				2,180,808				865,261				1,808,624				505,194				(4,779	)			9,300,110
Directly related cost of transportation and other expenses1		$	1,809,526				270,080				117,376				1,700,025				612,606				1,200,753				345,873				(2,239	)			6,054,000
Salaries and other operating expenses2		$	1,037,997				143,237				69,595				273,074				175,770				493,335				115,710				(2,541	)			2,306,177
Operating income		$	463,804				23,014				10,373				207,709				76,885				114,536				43,611				1				939,933
Identifiable assets at period end		$	2,595,576				174,509				109,380				449,529				237,470				721,259				256,199				(20,113	)			4,523,809
Capital expenditures		$	23,845				1,247				442				1,534				971				7,830				3,445				—				39,314
Depreciation and amortization		$	44,039				1,879				1,123				4,597				1,940				11,313				2,869				—				67,760
Equity		$	1,774,874				19,222				54,581				158,329				103,573				167,141				154,038				(40,345	)			2,391,413
For the twelve months ended December 31, 2022:
Revenues		$	4,869,364				517,662				257,721				5,810,088				2,144,034				2,471,456				1,005,489				(4,530	)			17,071,284
Directly related cost of transportation and other expenses1		$	2,943,232				310,206				160,273				4,853,902				1,751,187				1,768,102				791,887				(1,892	)			12,576,897
Salaries and other operating expenses2		$	944,050				188,192				72,177				504,805				238,658				573,598				151,069				(2,533	)			2,670,016
Operating income		$	982,082				19,264				25,271				451,381				154,189				129,756				62,533				(105	)			1,824,371
Identifiable assets at period end		$	3,070,697				209,516				123,003				675,022				316,777				938,660				283,872				(27,113	)			5,590,434
Capital expenditures		$	56,411				2,954				937				2,976				1,543				17,868				4,135				—				86,824
Depreciation and amortization		$	35,461				1,892				1,123				4,682				1,966				9,640				2,574				—				57,338
Equity		$	2,246,417				31,132				56,416				274,703				136,944				263,278				145,269				(40,624	)			3,113,535
1 Directly related cost of transportation and other expenses totals Operating Expenses from Airfreight services, Ocean freight and ocean services and Customs brokerage and other services as shown in the Condensed Consolidated Statements of Earnings.
2 Salaries and other operating expenses totals Salaries and related, Rent and occupancy, Depreciation and amortization, Selling and promotion and Other as shown in the Condensed Consolidated Statements of Earnings.
3 In 2022, certain intercompany fees were billed to our subsidiaries in the 4th quarter covering the entirety of 2022. This resulted in fourth quarter operating losses or reduced operating income for some of our business segments when compared to the current year where these amounts were billed monthly.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240219324553/en/

Jeffrey S. Musser

President and Chief Executive Officer

(206) 674-3433

Bradley S. Powell

Senior Vice President and Chief Financial Officer

(206) 674-3412

Geoffrey Buscher

Director - Investor Relations

(206) 892-4510

Source: Expeditors International of Washington, Inc.

FAQ

What was the percentage decrease in Diluted Net Earnings per share for Expeditors International of Washington, Inc. (EXPD) in the fourth quarter of 2023 compared to the same quarter in 2022?

The Diluted Net Earnings per share decreased by 21% to $1.09.

How much did the Net Earnings decrease by for Expeditors International of Washington, Inc. (EXPD) in the fourth quarter of 2023?

The Net Earnings decreased by 28% to $159 million.

What was the Operating Income for Expeditors International of Washington, Inc. (EXPD) in the fourth quarter of 2023?

The Operating Income decreased by 40% to $199 million.

What was the revenue figure for Expeditors International of Washington, Inc. (EXPD) in the fourth quarter of 2023?

The Revenues decreased by 34% to $2.3 billion.

What factors contributed to market uncertainty for Expeditors International of Washington, Inc. (EXPD) in the fourth quarter of 2023?

Global conflicts and cautious inventory management by shippers were cited as contributing factors to market uncertainty.