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Expeditors (EXPD) Stock Down on Bearish Q4 Earnings Guidance

Zacks Equity Research

Shares of Expeditors International of Washington EXPD shed 5.6% of value on Jan 17 to close the trading session at $76.82. The downside followed the lackluster earnings guidance released by the company for fourth-quarter 2019. Detailed results should be out on Feb 18.

Expeditors expects fourth-quarter 2019 earnings per share in the 78-81 cents range. The Zacks Consensus Estimate is currently pegged at 95 cents. Moreover, the company expects fourth-quarter operating income between $177 million and $183 million. Notably, this Seattle, WA- based company had reported operating income and earnings of $217 million $1.02 per share in fourth-quarter 2018.

The company’s president and chief executive officer Jeffrey S. Musser attributed the bearish fourth-quarter 2019 outlook to factors like “slowing of various global economies, trade disputes, and a customer base that is taking advantage of a market that appears to be changing from a supply and demand standpoint.”

In fact, Expeditors has been plagued with the above-mentioned headwinds for quite some time. Given the company’s exposure in China, it is suffering due low shipment volume. Notably, air freight revenues from North Asia declined 13% in the first nine months of 2019. In fact, revenues from Expeditors' primary unit, Airfreight Services, declined 8.2% during the same time frame. Volumes with respect to airfreight tonnage also declined in this period.

Due to these woes, the stock has underperformed its industry as well as the S&P 500 index in a year’s time. While the stock has gained 12.3% over the past year, its industry and the S&P 500 index have appreciated 12.9% and 25.6%, respectively.

Though the Phase 1 trade deal between United States and China — the two largest economic superpowers across the globe — bodes well as it provides tariff relief, the development will not affect Expeditor’s quarterly results as the agreement was signed this January. Consequently, quarterly shipment volumes are likely to reflect a decline as well, which, in turn, might have affected Expeditor’s fourth-quarter performance.

Zacks Rank & Key Picks

Expeditors currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the Zacks Transportation sector are Delta Air Lines DAL, Ship Finance International Limited SFL and Grupo Aeroportuario del Pacifico PAC, sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Delta, Ship Finance International and Grupo Aeroportuario have gained more than 1%, 11% and 30%, respectively, over the past six months.

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