Shares of Expeditors International of Washington EXPD have declined 11.6% in the past year compared with its industry’s 17.5% fall.
Expeditors' primary revenue-generating segment, Airfreight Services, performed disappointingly in 2019 (revenues declined 10.5%), mainly due to slowdown in global trade following the U.S.-China trade war. Given the company’s considerable exposure in China (26% of last-year revenues came from China exports and imports) it is suffering due to soft shipment volumes. Notably, revenues from North Asia dwindled significantly in 2019.
The coronavirus outbreak in China is another woe. The company expects its first-quarter 2020 results to be hurt by this adversity. The extended closure of factories in China due to the COVID-19 pandemic might have dented freight volumes in the March quarter. Global supply chains are likely to have been disrupted by the dearth of raw materials, parts and supplies.
Expeditors' rising operating expenses are a concern too. Operating expenses escalated 18% year over year in 2018 due to higher labor costs among other items. Moreover, as Expeditors operates globally, it is exposed to foreign currency risks. Notably, foreign currency losses shot up more than 100% in 2019 on a year-over-year basis.
Southbound Estimate Revisions
The bearish sentiment surrounding the stock is evident from the Zacks Consensus Estimate for current-year earnings being revised 5.7% downward in the past 60 days to $3.46.
Additionally, Expeditors carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In light of these downsides, it is advisable for investors to discard the stock from their portfolio for now.
Better-ranked stocks in the Zacks Transportation sector include Dynagas LNG Partners LP DLNG, GATX Corporation GATX and Frontline Limited FRO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dynagas LNG Partners, GATX and Frontline expect the current-year earnings to increase more than 2000%, 5.4% and 142%, respectively, year over year.
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