Expeditors International, a rare transportation company, may have benefited from the chaos of the first quarter. The key financial indicators for Expeditors were all solidly higher. The formula for its better bottom-line performance was that revenues were up 21%, while the cost of purchased transportation and related expenses increased more at 24%. However, salaries and other operating expenses only rose by 12%.
This led to an increase in operating income of 24%, reaching $265.9 million from $214.8 million a year earlier. Net earnings also went up 20% to $203.8 million from $169.2 million. The net income per diluted share rose to $1.47 from $1.17 a year earlier, beating consensus forecasts by 12 cents per share and revenue of $2.67 billion was $130 million more than forecast.
According to SeekingAlpha, the performance exceeded expectations. The head count increased to 19,203 from 18,403, a jump of 4.3%. In its prepared statement accompanying its earnings, CFO Bradley Powell said, "We were again careful not to increase headcount ahead of our ability to grow tonnage and volumes and increase profitability."
Despite beating the consensus forecasts, Expeditors’ stock was down about 3.6% in the first half-hour of trading Tuesday. Its stock is down about 9.2% in the past year. Expeditors (NYSE: EXPD) does not hold an earnings call with analysts.
The tonnage moved by Expeditors showed significant gains year over year, possibly due to "pull-forward" imports to get ahead of tariffs. The largest jump was for airfreight in March, which rose 15% from the first quarter of 2024. Ocean freight in January was the second-largest increase, up 10% from 2024’s corresponding quarter.
Every other year-on-year gain for both airfreight and ocean freight was between 5% and 8%. The overall increase for the quarter was 9% for airfreight and 8% for ocean freight. In its prepared earnings statement, CEO and President Daniel Wall said that current conditions were a "frenzied landscape of tariffs, threats of tariffs, shifting geopolitics, and other disruptions" that Expeditors often found positive for its business in the past.
However, he added, "I am not sure any of us have ever seen anything like the non-stop, rapidly shifting rules and regulations that have impacted our industry in recent days." Wall highlighted some features of the markets Expeditors worked in during the quarter. "Airfreight increased on higher buy and sell rates and growth in tonnage from strong demand, primarily in technology, as importers front-loaded shipments in anticipation of higher trade tariffs," he said.
"Air capacity remained tight due to e-commerce export demand from North Asia and ongoing re-sourcing to South Asia and India." On the water, ocean freight at Expeditors grew in part because of the frontloading of shipments. Wall added that transit times remain elevated because of diversions away from the Red Sea.
Wall was cautious looking forward, saying that the short- and long-term outlook is "unpredictable to us as it is to everyone." He stated that air capacity and rates will be volatile, adding that the end of the de minimis exemption may impact both. Expeditors is seeing a drop-off in exports out of China to the U.S. that has been widely reported elsewhere.
"While some of those volumes are shifting to other lanes, as customers look to mitigate their exposure to China-specific tariffs, it is too early to know what the overall decline in volumes might be," Wall said. "Speculation regarding additional tariffs may cause more customers to pause or cancel shipments entirely." The uncertainty will likely continue for some time, he added.
Tonnage and Revenue Growth
The tonnage moved by Expeditors showed significant gains year over year, possibly due to "pull-forward" imports to get ahead of tariffs. The largest jump was for airfreight in March, which rose 15% from the first quarter of 2024. Ocean freight in January was the second-largest increase, up 10% from 2024’s corresponding quarter.
Every other year-on-year gain for both airfreight and ocean freight was between 5% and 8%. The overall increase for the quarter was 9% for airfreight and 8% for ocean freight. This growth in tonnage led to a significant increase in revenue for Expeditors, with revenues up 21%.
Cost Control
Expeditors’ ability to control costs played a crucial role in its better bottom-line performance. The cost of purchased transportation and related expenses increased more at 24%, but salaries and other operating expenses only rose by 12%. This led to an increase in operating income of 24%, reaching $265.9 million from $214.8 million a year earlier.
Headcount and Talent Management
The head count increased to 19,203 from 18,403, a jump of 4.3%. In its prepared statement accompanying its earnings, CFO Bradley Powell said, "We were again careful not to increase headcount ahead of our ability to grow tonnage and volumes and increase profitability." This suggests that Expeditors has been cautious in its hiring practices, ensuring that it does not overstaff.
Stock Performance
Despite beating the consensus forecasts, Expeditors’ stock was down about 3.6% in the first half-hour of trading Tuesday. Its stock is down about 9.2% in the past year. This suggests that investors may be cautious about the company’s future prospects, despite its strong performance.
Market Outlook
Expeditors CEO and President Daniel Wall expressed caution about the short- and long-term outlook for the company. He stated that air capacity and rates will be volatile, adding that the end of the de minimis exemption may impact both. Expeditors is seeing a drop-off in exports out of China to the U.S. that has been widely reported elsewhere.
Conclusion
Expeditors International’s first-quarter results were strong, with all key financial indicators solidly higher. The company’s ability to control costs and manage its headcount played a crucial role in its better bottom-line performance. However, the short- and long-term outlook for Expeditors is uncertain, with air capacity and rates expected to be volatile. As the company navigates these challenges, it will be important for investors to keep a close eye on its performance.