Expeditors Benefits From Dividends & Buybacks, Costs High
Shares of Expeditors International of Washington, Inc. EXPD have fared well in a year’s time. The stock has gained 21.3% compared with the industry’s rise of 11.9%.
The company has an impressive surprise history. It beat earnings estimates in each of the trailing four quarters, the average being 10.2%.
Moreover, the company’s efforts to reward shareholders in the form of dividends and share repurchases are impressive. In May, the company announced a 7.1% hike in semi-annual cash dividend to 45 cents per share (annualized 90 cents). On the buyback front, the company repurchased 5.8 million shares at an average price of $70.92 as of Jun 30, 2018.
Furthermore, Expeditors’ trailing 12-month return on equity (ROE) underlines its growth potential and reflects efficient utilization of shareholders’ funds. The company’s ROE of 26.7% compares favorably with ROE of 17.3% for its industry and 17.1% for the S&P 500 index.
Additionally, the company’s healthy balance sheet is a positive. An asset-light business model allows Expeditors to maintain a debt-free balance sheet. The company also has an impressive Growth Score of B.
In spite of these tailwinds, the company has its own share of challenges. High-operating expenses are a major headwind, which can hurt the bottom line in the upcoming quarters.
The stock appears to be overvalued compared with the market at large in terms of enterprise value (EV) to EBITDA ratio. The company currently has a trailing 12-month EV/EBITDA ratio of 15.3 compared with the S&P 500's 12.
We are also concerned about the performance of Airfreight Service segment. Below-par performance of this key sector might hurt the stock significantly as major portion of revenues are generated from this source. The challenging conditions in the airfreight services market due to overcapacity woes are concerns. We are also worried about the adverse impact of foreign currency movements, as the company operates globally.
Considering these headwinds, we advise investors to wait for a better entry point before investing in the shares of Expeditors. The company’s Zacks Rank #3 (Hold) seems to suggest the same.
Stocks to Consider
A few better-ranked stocks in the broader Transportation Sector are Matson, Inc MATX, Trinity Industries, Inc TRN and Old Dominion Freight Line, Inc ODFL. While Old Dominion carries a Zacks Rank #2 (Buy), Matson and Trinity sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Matson, Trinity and Old Dominion have gained 38%, 14.8% and 8.1% in the past six months, respectively.
5 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2018 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs. A bonus Zacks Special Report names this breakthrough and the 5 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains.
Click to see them right now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Trinity Industries, Inc. (TRN) : Free Stock Analysis Report
Matson, Inc. (MATX) : Free Stock Analysis Report
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
Old Dominion Freight Line, Inc. (ODFL) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
