Expeditors International recorded a second quarter in which airfreight tonnage rose significantly year on year, while ocean freight tonnage declined from a year ago.
By kilograms, airfreight rose 13% in April, 15% in May and 19% in June, on the way to a 15% overall increase in tonnage from a year earlier. That followed a first quarter in which airfreight tonnage rose 4% overall.
Expeditors (NASDAQ: EXPD) also reported that second-quarter air tonnage was 10% higher than in the first quarter.
Meanwhile, ocean freight tonnage declined 3% year on year in each of the three months of the quarter. Expeditors does not release tonnage figures, but the year-on-year decline in ocean freight tonnage marked a reversal of first-quarter trends. In the first three months of the year, ocean freight tonnage was down 6% in January, up 6% in February and up 8% in March, before posting the three months of negative numbers year on year during the second quarter.
The cost of moving freight rose more than the revenues those movements generated.
Expeditors reported that its cost of transportation rose 16% year on year while its revenues were up 9%.
That mismatch helped lead to a 10% decline in operating income and net income attributable to shareholders. That line item was down 11%, to $175.5 million from $196.8 million a year ago.
Earnings per share attributable to shareholders was down 5%, to $1.24 from $1.30.
The company kept the line item of salaries and other expenses relatively flat, rising just 1% from a year earlier. Total head count dropped 3.1%, to 18,463 from 19,053 a year earlier. In the two biggest areas of employment, North American head count dropped 4.2%. The decline was 3.3% in Europe.
Expeditors does not hold a conference call with analysts. But president and CEO Jeffrey Musser does publish relatively extensive comments on the status of the market.
Musser said the quarter was “erratic” because of “the rapid changes and imbalances in buy versus sell rates, particularly on exports out of Asia.”
The ocean freight market has been “significantly disrupted” because of ships avoiding Houthi attacks in the Red Sea, Musser said, “causing less frequent services due to blank sailings, longer transit times as well as port congestions.”
In the air, capacity “has been constrained by e-commerce demand. … International direct e-commerce demand from North Asia outweighed increased carrier capacity to accommodate this growth in demand,” Musser said. “The air markets have further been impacted by manufacturing relocations.”
Musser conceded that making a forecast is tough. “Our ability to see much beyond our day-to-day levels of activity remains challenging,” he said. “While there are some signs of improving market conditions, there is much uncertainty with regard to demand, capacity, and pricing, not to mention unpredictable events with the potential to impact global shipping for days, weeks, or even longer.”
Expeditors’ business model is to buy cargo capacity from carriers like airlines or ocean freight companies, as well as trucks, and then resell that space to customers. It owns no airplanes or ships.
Expeditors stock has been relatively stable in the past 52 weeks. Its low during that period was $107.03 on Nov. 7; its high was $131.17 on Jan. 5.
The reaction to the earnings Tuesday was mostly negative. On a day when stock markets were strongly higher, rebounding from Monday’s sell-off, Expeditors was down $3.89 or 3.21%, to $117.48, at approximately 10:20 a.m.
Expeditors is a rarity in logistics: a dividend aristocrat, defined as a company that has raised its payout annually for at least 25 years. It has declared a higher dividend this year, guaranteeing its place in that exclusive club for another year.
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