Expeditors Reports Second Quarter 2024 EPS of $1.24

Rhea-AI Summary

Expeditors International of Washington (NYSE:EXPD) reported its Q2 2024 financial results, showing mixed performance compared to Q2 2023. Diluted EPS decreased 5% to $1.24, while net earnings attributable to shareholders fell 11% to $175 million. Operating income declined 10% to $224 million, but revenues increased 9% to $2.4 billion. Airfreight tonnage volume saw a 15% increase, while ocean container volume decreased 3%.

The company faced challenges due to rapid changes in buy versus sell rates, particularly on exports from Asia. Air market capacity was constrained by e-commerce demand, and ocean routing was disrupted by geopolitical events in the Red Sea. Despite these challenges, Expeditors continued to adapt, focusing on cost control and efficiency improvements.

Positive

• Revenues increased 9% to $2.4 billion
• Airfreight tonnage volume increased 15% year-over-year and 10% sequentially
• Company returned $205 million to shareholders in stock repurchases and dividends

Negative

• Diluted EPS decreased 5% to $1.24
• Net earnings attributable to shareholders decreased 11% to $175 million
• Operating income decreased 10% to $224 million
• Ocean container volume decreased 3%
• Buy rates outpaced increased sell rates in both air and ocean markets
• Expenses remain high compared to 30% efficiency target

Insights

Financial Analyst

Expeditors' Q2 2024 results present a mixed picture. While revenues increased by 9% to $2.4 billion, EPS decreased by 5% to $1.24 and net earnings fell 11% to $175 million. The company's efficiency, measured by operating income as a percentage of revenue less directly related costs, remains below its 30% target.

The air freight segment showed strength with a 15% increase in tonnage, driven by e-commerce demand. However, the ocean segment faced challenges, with container volume decreasing 3% due to geopolitical disruptions in the Red Sea. The company's ability to adapt to these market conditions while managing costs will be important for future performance.

Investors should note the company's continued investment in technology and its $205 million return to shareholders through repurchases and dividends, indicating confidence in its long-term prospects despite short-term challenges.

Supply Chain Expert

The logistics industry is facing significant disruptions and volatility. Expeditors' results reflect these challenges, particularly in the ocean freight sector. The Red Sea issues have led to longer transit times, port congestion and blank sailings, impacting efficiency and costs.

The air freight market is experiencing a shift due to e-commerce growth and manufacturing relocations. This has created a mismatch between buy and sell rates, pressuring margins. The 15% increase in air tonnage suggests Expeditors is capturing market share, but at the cost of profitability.

The company's focus on cost control and technology investments is prudent given the uncertain environment. However, achieving the 30% efficiency target may remain challenging in the short term due to ongoing market imbalances and the need for continued investments in capabilities.

Market Strategist

Expeditors' performance underscores the complex dynamics in the global logistics sector. The company's ability to grow revenue in a challenging environment is commendable, but the pressure on margins is a concern. The divergence between air and ocean segments highlights the importance of a diversified service offering.

The ongoing geopolitical tensions and shifts in global trade patterns create both risks and opportunities. Expeditors' investments in technology and strategic initiatives to explore new growth areas are important for long-term competitiveness. However, the short-term outlook remains uncertain, with visibility beyond day-to-day operations.

Investors should monitor the company's progress in aligning costs with activity levels and its ability to capitalize on emerging trends such as the growth in e-commerce and potential reshoring of manufacturing. The stock's performance may remain volatile until there are clearer signs of market stabilization and margin improvement.

SEATTLE--(BUSINESS WIRE)-- Expeditors International of Washington, Inc. (NYSE:EXPD) today announced second quarter 2024 financial results including the following comparisons to the same quarter of 2023:

• Diluted Net Earnings Attributable to Shareholders per share (EPS¹) decreased 5% to $1.24
• Net Earnings Attributable to Shareholders decreased 11% to $175 million
• Operating Income decreased 10% to $224 million
• Revenues increased 9% to $2.4 billion
• Airfreight tonnage volume increased 15% and ocean container volume decreased 3%

"We continued to adapt well to another erratic quarter for our industry, which has been impacted by the rapid changes and imbalances in buy versus sell rates, particularly on exports out of Asia,” said Jeffrey S. Musser, President and Chief Executive Officer. “Air market capacity has been constrained by e-commerce demand, and ocean routing has been significantly disrupted by geopolitical events in the Red Sea, causing less frequent services due to blank sailings, longer transit times as well as port congestion. We have continued to adjust to the disruptions and uneven demand, keeping costs in check while we work to bring efficiency back in line with historical expectations.

“Air tonnage improved 15% year-over-year and 10% sequentially against Q1 2024, but buy rates outpaced increased sell rates, as international direct e-commerce demand from North Asia outweighed increased carrier capacity to accommodate this growth in demand. The air markets have further been impacted by manufacturing relocations. With respect to the ocean market, longer sailings due to insecurity on the Red Sea have largely lessened the benefits of any increased ocean capacity brought on this quarter. Even though ocean volumes increased for a second sequential quarter, buy rate increases outpaced higher sell rates.

“As we noted in the first quarter, our ability to see much beyond our day-to-day levels of activity remains challenging. While there are some signs of improving market conditions, there is much uncertainty with regard to demand, capacity, and pricing, not to mention unpredictable events with the potential to impact global shipping for days, weeks, or even longer. I am grateful for the customer-focused dedication of our workforce, particularly during these unpredictable times. We remain focused on keeping costs in check and are ready to pivot for whatever new challenges arise.”

Bradley S. Powell, Senior Vice President and Chief Financial Officer, added, “Expenses are still high compared to our 30% efficiency target (operating income as a percentage of revenue less directly related cost of transportation and other expenses), with compensation being our largest and most variable operating expense. We continue to focus on alignment of shipment activity with headcount. Once again, our primary area of increased headcount during the quarter compared to the same quarter last year was in information systems, as we add critical enhancements to further bolster our technology solutions, network and security. As we drive to achieve our efficiency target, we will continue to make important investments in people, processes and technology, as well as to invest in our strategic efforts to explore new areas for profitable growth.”

Mr. Powell also noted that the Company returned $205 million to shareholders in common stock repurchases and dividends during the second quarter of 2024.

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 inflation; fragile economies; continued growth in air and ocean carrier capacity and the impact on rates; unpredictability in the ocean and air markets, including uncertainty due to conflicts in the Middle East and Red Sea; new capacity in the marketplace; longer ocean transit times; strong e-commerce demand in the air market; and cautious shipper demand and variable rate stability. Future financial performance could differ materially because of factors such as: our ability to keep headcount and other costs in check while continuing to drive efficiency back towards our historical expectations; the alignment of our variable compensation structure with performance; our ability to enhance and bolster our network security; that management is able to grow the business and explore new areas for profitable growth; 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 geo-political risks and 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 and contingencies, including risks associated with tax audits, 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, 2023, 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. Second Quarter 2024 Earnings Release, August 6, 2024 Financial Summary for the three months ended June 30, 2024 and 2023 (Unaudited) (in 000's of US dollars except share data)
		Three months ended June 30,											Six months ended June 30,
		2024				2023				% Change			2024				2023				% Change
Revenues		$	2,439,001			$	2,239,752			9	%		$	4,645,679			$	4,832,341			(4	)%
Directly related cost of transportation and other expenses 1		$	1,639,408			$	1,419,183			16	%		$	3,072,688			$	3,138,285			(2	)%
Salaries and other operating expenses 2		$	575,674			$	572,072			1	%		$	1,134,296			$	1,169,590			(3	)%
Operating income		$	223,919			$	248,497			(10	)%		$	438,695			$	524,466			(16	)%
Net earnings attributable to shareholders		$	175,469			$	196,800			(11	)%		$	344,621			$	422,811			(18	)%
Diluted earnings attributable to shareholders per share		$	1.24			$	1.30			(5	)%		$	2.41			$	2.75			(12	)%
Basic earnings attributable to shareholders per share		$	1.24			$	1.31			(5	)%		$	2.43			$	2.78			(13	)%
Diluted weighted average shares outstanding			141,716				151,563							142,928				153,516
Basic weighted average shares outstanding			141,013				150,435							142,104				152,291

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 six months ended June 30, 2024, we repurchased 0.9 million and 3.9 million shares of common stock at an average price of $116.88 and $119.43 per share. During the three and six months ended June 30, 2023 we repurchased 6.0 million and 8.0 million shares of common stock at an average price of $114.61 and $113.23 per share.

		Employee Full-time Equivalents as of
		June 30, 2024				June 30, 2023
North America			6,847				7,154
Europe			3,812				3,946
North Asia			2,238				2,340
South Asia			1,717				1,731
Middle East, Africa and India			1,391				1,459
Latin America			754				765
Information Systems			1,291				1,247
Corporate			413				411
Total			18,463				19,053

		Second quarter year-over-year percentage increase (decrease) in:
2024		Airfreight kilos			Ocean freight FEU
April		13	%		(3	)%
May		15	%		(3	)%
June		19	%		(2	)%
Quarter		15	%		(3	)%

Investors may submit written questions via e-mail to: investor@expeditors.com. Questions received by the end of business on August 9, 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)
		June 30, 2024				December 31, 2023
Assets:
Current Assets:
Cash and cash equivalents		$	1,271,853			$	1,512,883
Accounts receivable, less allowance for credit loss of $6,966 at June 30, 2024 and $6,550 at December 31, 2023			1,843,894				1,532,599
Deferred contract costs			395,241				218,807
Other			185,766				170,907
Total current assets			3,696,754				3,435,196
Property and equipment, less accumulated depreciation and amortization $608,860 at June 30, 2024 and $597,473 at December 31, 2023			461,494				479,225
Operating lease right-of-use assets			537,114				516,280
Goodwill			7,927				7,927
Deferred federal and state income taxes, net			69,646				63,690
Other assets, net			15,406				21,491
Total assets		$	4,788,341			$	4,523,809
Liabilities:
Current Liabilities:
Accounts payable		$	1,073,476			$	860,856
Accrued liabilities, primarily salaries and related costs			486,989				447,336
Contract liabilities			474,507				280,909
Current portion of operating lease liabilities			104,042				99,749
Federal, state and foreign income taxes			21,904				15,562
Total current liabilities			2,160,918				1,704,412
Noncurrent portion of operating lease liabilities			448,996				427,984
Shareholders’ Equity:
Preferred stock, none issued			—				—
Common stock, par value $0.01 per share. Issued and outstanding: 140,633 shares at June 30, 2024 and 143,866 shares at December 31, 2023			1,406				1,439
Additional paid-in capital			7,732				—
Retained earnings			2,385,740				2,580,968
Accumulated other comprehensive loss			(218,457	)			(192,057	)
Total shareholders’ equity			2,176,421				2,390,350
Noncontrolling interest			2,006				1,063
Total equity			2,178,427				2,391,413
Total liabilities and equity		$	4,788,341			$	4,523,809

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings (In thousands, except per share data) (Unaudited)
		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Revenues:
Airfreight services		$	860,323			$	751,171			$	1,619,697			$	1,656,074
Ocean freight and ocean services			651,675				593,801				1,222,461				1,291,108
Customs brokerage and other services			927,003				894,780				1,803,521				1,885,159
Total revenues			2,439,001				2,239,752				4,645,679				4,832,341
Operating Expenses:
Airfreight services			645,168				525,027				1,182,759				1,191,049
Ocean freight and ocean services			478,121				405,807				892,104				889,489
Customs brokerage and other services			516,119				488,349				997,825				1,057,747
Salaries and related			426,431				428,558				839,593				878,406
Rent and occupancy			59,597				58,205				120,849				115,837
Depreciation and amortization			14,979				15,506				30,140				30,767
Selling and promotion			7,998				6,314				14,777				12,698
Other			66,669				63,489				128,937				131,882
Total operating expenses			2,215,082				1,991,255				4,206,984				4,307,875
Operating income			223,919				248,497				438,695				524,466
Other Income (Expense):
Interest income			11,904				17,792				26,782				36,567
Other, net			98				(106	)			3,626				5,728
Other income, net			12,002				17,686				30,408				42,295
Earnings before income taxes			235,921				266,183				469,103				566,761
Income tax expense			60,770				70,390				123,552				144,970
Net earnings			175,151				195,793				345,551				421,791
Less net earnings (losses) attributable to the noncontrolling interest			(318	)			(1,007	)			930				(1,020	)
Net earnings attributable to shareholders		$	175,469			$	196,800			$	344,621			$	422,811
Diluted earnings attributable to shareholders per share		$	1.24			$	1.30			$	2.41			$	2.75
Basic earnings attributable to shareholders per share		$	1.24			$	1.31			$	2.43			$	2.78
Weighted average diluted shares outstanding			141,716				151,563				142,928				153,516
Weighted average basic shares outstanding			141,013				150,435				142,104				152,291

EXPEDITORS INTERNATIONAL OF WASHINGTON, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited)
		Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Operating Activities:
Net earnings		$	175,151			$	195,793			$	345,551			$	421,791
Adjustments to reconcile net earnings to net cash from operating activities:
Provisions for losses (recoveries) on accounts receivable			1,644				(167	)			2,038				905
Deferred income tax benefit			(6,917	)			(3,560	)			(4,623	)			(1,524	)
Stock compensation expense			25,704				18,595				38,076				31,083
Depreciation and amortization			14,979				15,506				30,140				30,767
Other, net			1,885				2,564				3,870				3,723
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable			(286,085	)			174,321				(346,627	)			682,927
Increase (decrease) in accounts payable and accrued liabilities			211,692				(149,986	)			295,283				(352,909	)
(Decrease) increase in deferred contract costs			(122,258	)			18,166				(186,320	)			85,787
Increase (decrease) in contract liabilities			135,067				(23,803	)			204,375				(108,250	)
Decrease in income taxes payable, net			(29,854	)			(93,817	)			(7,168	)			(93,726	)
Increase in other, net			5,761				4,834				9,078				4,284
Net cash from operating activities			126,769				158,446				383,673				704,858
Investing Activities:
Purchase of property and equipment			(7,943	)			(10,481	)			(18,124	)			(20,607	)
Other, net			66				(794	)			163				(219	)
Net cash from investing activities			(7,877	)			(11,275	)			(17,961	)			(20,826	)
Financing Activities:
Proceeds (payments) on borrowings on lines of credit, net			1,259				1,311				(15,983	)			(13,596	)
Proceeds from issuance of common stock			6,449				9,176				14,478				18,464
Repurchases of common stock			(102,300	)			(687,689	)			(462,824	)			(901,191	)
Dividends paid			(102,638	)			(102,263	)			(102,638	)			(102,263	)
Payments for taxes related to net share settlement of equity awards			(10,163	)			(12,056	)			(15,348	)			(19,501	)
Net cash from financing activities			(207,393	)			(791,521	)			(582,315	)			(1,018,087	)
Effect of exchange rate changes on cash and cash equivalents			(10,102	)			(7,857	)			(24,427	)			(1,489	)
Change in cash and cash equivalents			(98,603	)			(652,207	)			(241,030	)			(335,544	)
Cash and cash equivalents at beginning of period			1,370,456				2,350,794				1,512,883				2,034,131
Cash and cash equivalents at end of period		$	1,271,853			$	1,698,587			$	1,271,853			$	1,698,587
Taxes Paid:
Income taxes		$	96,739			$	173,670			$	133,603			$	244,456

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 June 30, 2024:
Revenues		$	779,170				110,723				45,314				637,351				287,943				409,455				170,349				(1,304	)			2,439,001
Directly related cost of transportation and other expenses1		$	423,102				65,374				24,640				512,146				223,238				262,451				128,949				(492	)			1,639,408
Salaries and other operating expenses2		$	263,675				34,339				14,551				70,762				43,084				119,713				30,352				(802	)			575,674
Operating income		$	92,393				11,010				6,123				54,443				21,621				27,291				11,048				(10	)			223,919
Identifiable assets at period end		$	2,566,053				173,764				93,967				626,892				336,598				738,068				284,672				(31,673	)			4,788,341
Capital expenditures		$	2,948				575				129				355				1,955				1,094				887				—				7,943
Equity		$	1,546,936				32,700				41,135				163,913				129,886				151,165				153,155				(40,463	)			2,178,427
For the three months ended June 30, 2023:
Revenues		$	805,948				110,255				49,972				510,027				199,868				440,916				123,972				(1,206	)			2,239,752
Directly related cost of transportation and other expenses1		$	426,121				69,108				29,428				387,973				134,477				288,808				83,890				(623	)			1,419,182
Salaries and other operating expenses2		$	256,277				34,793				16,265				68,290				44,048				125,196				27,820				(616	)			572,073
Operating income		$	123,550				6,354				4,279				53,764				21,343				26,912				12,262				33				248,497
Identifiable assets at period end		$	2,553,553				192,362				115,458				495,229				213,026				748,449				258,849				(12,886	)			4,564,040
Capital expenditures		$	6,623				161				46				352				168				2,336				795				—				10,481
Equity		$	1,873,220				45,252				59,289				220,638				93,476				146,174				158,133				(38,078	)			2,558,104
		UNITED STATES				OTHER NORTH AMERICA				LATIN AMERICA				NORTH ASIA				SOUTH ASIA				EUROPE				MIDDLE EAST, AFRICA AND INDIA				ELIMI- NATIONS				CONSOLI- DATED
For the six months ended June 30, 2024:
Revenues		$	1,530,713				217,573				89,806				1,182,292				515,662				807,772				304,455				(2,594	)			4,645,679
Directly related cost of transportation and other expenses1		$	827,051				132,084				49,104				938,620				387,262				516,970				222,741				(1,144	)			3,072,688
Salaries and other operating expenses2		$	519,383				67,423				31,315				138,022				83,996				236,801				58,816				(1,460	)			1,134,296
Operating income		$	184,279				18,066				9,387				105,650				44,404				54,001				22,898				10				438,695
Identifiable assets at period end		$	2,566,053				173,764				93,967				626,892				336,598				738,068				284,672				(31,673	)			4,788,341
Capital expenditures		$	8,476				1,974				282				637				2,099				3,312				1,344				—				18,124
Equity		$	1,546,936				32,700				41,135				163,913				129,886				151,165				153,155				(40,463	)			2,178,427
For the six months ended June 30, 2023:
Revenues		$	1,751,442				220,105				104,667				1,092,448				423,995				975,380				266,675				(2,371	)			4,832,341
Directly related cost of transportation and other expenses1		$	966,078				138,313				61,730				840,315				292,100				661,068				179,839				(1,159	)			3,138,284
Salaries and other operating expenses2		$	523,960				70,617				35,767				139,430				90,846				252,568				57,652				(1,249	)			1,169,591
Operating income		$	261,404				11,175				7,170				112,703				41,049				61,744				29,184				37				524,466
Identifiable assets at period end		$	2,553,553				192,362				115,458				495,229				213,026				748,449				258,849				(12,886	)			4,564,040
Capital expenditures		$	12,067				630				276				942				335				5,319				1,038				—				20,607
Equity		$	1,873,220				45,252				59,289				220,638				93,476				146,174				158,133				(38,078	)			2,558,104

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805786675/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 were Expeditors' (EXPD) key financial results for Q2 2024?

Expeditors reported Q2 2024 diluted EPS of $1.24 (down 5%), net earnings of $175 million (down 11%), operating income of $224 million (down 10%), and revenues of $2.4 billion (up 9%) compared to Q2 2023.

How did Expeditors' (EXPD) airfreight and ocean freight volumes perform in Q2 2024?

Expeditors' airfreight tonnage volume increased 15% year-over-year, while ocean container volume decreased 3% in Q2 2024 compared to the same period in 2023.

What challenges did Expeditors (EXPD) face in Q2 2024?

Expeditors faced challenges from rapid changes in buy versus sell rates, constrained air market capacity due to e-commerce demand, and disrupted ocean routing caused by geopolitical events in the Red Sea.

How much did Expeditors (EXPD) return to shareholders in Q2 2024?

Expeditors returned $205 million to shareholders through common stock repurchases and dividends during the second quarter of 2024.