Will Revenue Weakness Hit Expeditors (EXPD) Q4 Earnings?
Expeditors International of Washington Inc. EXPD is slated to report its fourth-quarter and full year 2015 earnings numbers on Feb 23.
In the third quarter of 2015, Expeditors had reported a positive earnings surprise of 5.08%. Let’s see how things are shaping up for this announcement.
Factors at Play
In the third quarter of 2015, revenues declined 3% from the year-ago figure. Soft air freight and ocean freight revenues hurt the top line in the third quarter. We expect the company to suffer from revenue weakness in the fourth quarter as well. Revenues will be hurt by adverse foreign currency movements.
The company also lacks business diversification, which is a major concern. Significant portions of the company’s revenues are derived from customers in industries with shipping patterns that are tied closely to consumer demand and production schedules. Consequently, weak consumer and business demand and delays in manufacturing will tend to hurt Expeditors’ revenues.
Nonetheless, we are encouraged by the company’s efforts to reward shareholders through dividend payments. We expect an update on the issue on the fourth quarter conference call.
Earnings Whispers
Our proven model does not show conclusively that Expeditors is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company stands at -3.33%, as the Most Accurate estimate is 58 cents while the Zacks Consensus Estimate is pegged higher at 60 cents.
Zacks Rank: Expeditors currently carries a Zacks Rank #4 (Sell).
Note that sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Stocks to Consider
Here are some transportation companies you may want to consider instead as our model shows these have the right combination of elements to post an earnings beat this quarter.
Controladora Vuela Compañía de Aviación, S.A.B. de C.V. VLRS, or Volaris, with an earnings ESP of +6.06% and a Zacks Rank #1. The company will reveal results on Feb 22.
Golar LNG Ltd. GLNG, with an earnings ESP of +9.68% and a Zacks Rank #3. The company is expected to reveal results on Feb 29.
FLY Leasing Limited FLY, with an earnings ESP of +39.29% and a Zacks Rank #2. The company will reveal results on Mar 8.
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