Industry Overview - The Zacks Transportation-Services industry is currently facing challenges such as dull freight rates, high inflation, and ongoing supply-chain disruptions, along with tariff-related uncertainties and geopolitical issues [1][4][7] - Companies in this industry provide logistics, leasing, and maintenance services, focusing on global logistics management and third-party logistics solutions [3] Current Trends - Supply-chain disruptions and weak freight rates continue to negatively impact the industry, with the Cass Freight Shipments Index declining by 2.4% year over year in June, marking a deterioration for 11 consecutive months [4] - The industry is experiencing significant inflation, particularly in labor and freight costs, prompting companies to implement cost-cutting measures to improve productivity and efficiency [5] - Despite economic recovery, the industry's earnings outlook is negative, with a 31.2% decrease in earnings estimates for 2025 since August 2024 [10] Financial Performance - The Zacks Transportation-Services industry has underperformed the S&P 500, declining by 12.8% over the past year, while the S&P 500 appreciated by 12.2% [12] - The industry is currently trading at a forward price-to-sales ratio of 1.32X, significantly lower than the S&P 500's 5.26X and the sector's 1.45X [15] Company Highlights - Expeditors International of Washington (EXPD) has a Zacks Rank 2 (Buy) and has consistently beaten earnings estimates by an average of 13.3% over the last four quarters, despite facing weak volumes [17] - C.H. Robinson Worldwide (CHRW) holds a Zacks Rank 3 (Hold) and has surpassed earnings estimates by an average of 14.5% in the past four quarters, with a strong liquidity position [21] - Matson (MATX), also with a Zacks Rank 3, has implemented effective cost-management actions and has beaten earnings estimates in three of the last four quarters, with an average beat of 9.7% [24]

Core Insights - Expeditors International (EXPD) has a strong track record of exceeding earnings estimates, particularly in the last two quarters, with an average surprise of 15.28% [1][5] - The company reported earnings of $1.30 per share for the most recent quarter, falling short of the expected $1.47, but still achieved a surprise of 13.08% [2] - In the previous quarter, Expeditors reported $1.68 per share against an expectation of $1.43, resulting in a surprise of 17.48% [2] Earnings Estimates and Predictions - Estimates for Expeditors International have been trending upwards, influenced by its history of earnings surprises [5] - The company currently has a positive Earnings ESP of +0.11%, indicating a bullish outlook from analysts regarding its earnings prospects [8] - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) suggests a high likelihood of another earnings beat in the upcoming report [8] Earnings ESP and Market Performance - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [6] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [7] - The next earnings report for Expeditors International is anticipated to be released on August 5, 2025 [8]

Core Viewpoint - The analysis presents a bullish outlook on Expeditors (NYSE: EXPD), highlighting its exceptional returns on equity and the stock's persistent undervaluation compared to the market [1]. Financial Performance - Expeditors has demonstrated phenomenal returns on equity, which is a key factor in the positive investment outlook [1]. Market Comparison - The stock is noted to be undervalued relative to the S&P 500, which is trading at a higher PE multiple, suggesting potential for price appreciation [1].

Industry Overview - The Zacks Transportation sector is experiencing multiple challenges, including increased expenses, inflation-driven high interest rates, a decline in freight demand, and supply chain issues [1][3] - Geopolitical uncertainties, particularly related to oil prices due to U.S. strikes on Iran, are raising concerns about a potential supply shock that could adversely affect the U.S. economy [2] Financial Performance - The transportation sector has seen a decline of 10.1% year over year, contrasting with the S&P 500's growth of 9.3% [3] Investment Opportunities - Despite the challenges, transportation sector stocks, particularly those with a focus on dividend growth, are recommended for investors [5][6] - Companies with a consistent history of increasing dividends are seen as resilient and capable of providing reliable income and potential long-term capital appreciation [6][7] Dividend Increases - Expeditors International of Washington, Inc. (EXPD) announced a 5.5% dividend hike, raising its quarterly dividend from $0.73 to $0.77, with a payout ratio of 24% and a five-year dividend growth rate of 8.6% [11] - FedEx Corporation (FDX) approved a 5.1% dividend increase, raising its quarterly dividend to $1.45 per share, with a payout ratio of 31% and a five-year dividend growth rate of 22% [12] - Delta Air Lines, Inc. (DAL) announced a significant 25% dividend hike, increasing its quarterly dividend to $0.1875 per share, with a payout ratio of 10% [13] Investment Criteria - A screening process for transportation stocks includes a dividend payout ratio of less than 60% and a dividend yield greater than 1%, ensuring sustainability and growth potential [9][10]

Core Viewpoint - Expeditors International (EXPD) has seen a 3.3% increase in shares over the past month, underperforming the S&P 500, raising questions about the sustainability of this trend leading up to the next earnings release [1] Estimates Movement - Estimates for Expeditors International have trended downward over the past month, with a consensus estimate shift of -6.05% [2] VGM Scores - Expeditors International holds a strong Growth Score of A but has a low Momentum Score of F, resulting in an overall VGM Score of C, indicating a middle-tier position in the value investment strategy [3] Outlook - The downward trend in estimates suggests a negative outlook for Expeditors International, currently holding a Zacks Rank 3 (Hold), with expectations for an in-line return in the coming months [4] Industry Performance - Expeditors International is part of the Zacks Transportation - Services industry, where Schneider National (SNDR) has performed better, gaining 6.8% over the past month and reporting revenues of $1.4 billion, a year-over-year increase of 6.3% [5] Schneider National Estimates - For the current quarter, Schneider National is expected to report earnings of $0.21 per share, unchanged from the previous year, with a Zacks Consensus Estimate change of -4% over the last 30 days, also holding a Zacks Rank 3 (Hold) and a VGM Score of B [6]

Core Viewpoint - Expeditors International of Washington, Inc. (EXPD) has announced a 5.5% increase in its quarterly cash dividend, raising it from 73 cents to 77 cents per share, reflecting the company's commitment to enhancing shareholder returns [1] Group 1: Dividend Increases - The recent dividend hike will be paid on June 16, 2025, to shareholders of record as of June 2 [1] - In May 2022, EXPD raised its semi-annual cash dividend by 15.5% to 67 cents per share, and in 2023, it increased the dividend by 3% from 67 cents to 69 cents [2] Group 2: Shareholder Returns - In 2022, EXPD rewarded shareholders with cash dividends totaling $213.79 million and share repurchases amounting to $1,581.908 million [2] - The management's decision to raise the dividend indicates strong confidence in the company's business outlook and commitment to shareholder value [4] Group 3: Investment Considerations - Dividend-paying stocks like EXPD provide a steady income stream and typically exhibit less price volatility, making them attractive for investors seeking to hedge against economic uncertainty [3] - Actions to enhance shareholder value, such as dividend increases, are believed to strengthen investor confidence and support long-term stock performance [4]

Revenue and Expenses - In Q1 2025, airfreight services revenues increased by 19% to $901.76 million, while expenses rose by 21% to $648.49 million, driven by a 9% increase in tonnage and 11% and 12% increases in average sell and buy rates respectively [72][73]. - Ocean freight services revenues surged by 37% to $781.67 million, with expenses increasing by 39% to $573.90 million, reflecting strong demand and higher rates [72]. - Customs brokerage and other services revenues grew by 12% to $982.99 million, with expenses rising by 15% to $554.28 million, indicating robust performance across all service categories [72]. - Ocean freight and ocean services revenues increased by 37% to $X million, while expenses rose by 39% to $Y million for the three months ended March 31, 2025, compared to the same period in 2024 [77]. - Ocean freight consolidation revenues and expenses increased by 50% and 48%, respectively, for Q1 2025, primarily due to a 39% increase in average sell rates and an 8% increase in containers shipped [78]. - North and South Asia ocean freight revenues increased by 43% and 73%, respectively, while expenses rose by 44% and 80% for Q1 2025 compared to a weak Q1 2024 [79]. - Customs brokerage and other services revenues increased by 12% to $A million, and expenses increased by 15% to $B million for Q1 2025, driven by higher shipment volumes in North America and Europe [82]. Income and Earnings - Operating income for Q1 2025 reached $265.86 million, a 24% increase compared to $214.78 million in Q1 2024 [72]. - Net earnings attributable to shareholders increased by 20% to $203.80 million, up from $169.15 million in the same quarter last year [72]. - Total bonuses to management increased by 31% in Q1 2025 compared to the same period in 2024, primarily due to higher operating income [87]. Cash Flow and Investments - Cash from operating activities was $343 million, up from $257 million in Q1 2024, demonstrating improved cash flow generation [63]. - Net cash provided by operating activities for Q1 2025 was $343 million, an increase of $86 million compared to $257 million in Q1 2024, primarily due to higher net earnings [96]. - Cash used in investing activities for Q1 2025 was $13 million, up from $10 million in the same period in 2024, primarily for capital expenditures [100]. - The company returned $177 million to shareholders through common stock repurchases, reflecting a commitment to shareholder value [63]. Trade and Market Conditions - The termination of the "de minimis exemption" for low-value goods from China and Hong Kong may impact future trade flows and revenue patterns [62]. - The company faces an unpredictable environment due to ongoing tariff changes and trade restrictions, which could affect future performance [62][66]. - Tonnage increased significantly on exports from South Asia and North Asia, driven by technology customer demand, with elevated tonnage in Q1 2025 as shippers front-loaded deliveries in anticipation of higher tariffs [74]. Foreign Exchange and Financial Position - An average 10% weakening of the U.S. dollar would increase operating income by approximately $16 million, while a 10% strengthening would reduce it by approximately $13 million for the three months ended March 31, 2025 [108]. - For the three months ended March 31, 2025, net foreign currency transactional losses were approximately $5 million, compared to gains of approximately $7 million during the same period in 2024 [109]. - As of March 31, 2025, borrowings under international unsecured bank lines of credit amounted to $32 million, with contingent liabilities of $72 million from standby letters of credit and guarantees [104]. - Cash and cash equivalents held by non-United States subsidiaries totaled $561 million, with $11 million in U.S. banks as of March 31, 2025 [105]. - At March 31, 2025, cash and cash equivalents were $1,319 million, with $707 million invested at various short-term market interest rates [110]. - The company had no long-term debt as of March 31, 2025, indicating a strong liquidity position [110]. - Foreign exchange risks are primarily related to currencies such as Chinese Yuan, Indian Rupee, Euro, and others, impacting earnings due to intercompany transactions [106]. - The translation of foreign subsidiaries' non-U.S. dollar financials results in cumulative translation adjustments affecting shareholders' equity [107]. - Management reported no material change in interest rate risk exposure in the first quarter of 2025, with a hypothetical 10 basis points change having a negligible impact on earnings [110]. Expenses and Overheads - Other overhead expenses increased by 14% or $20 million for Q1 2025, primarily due to technology-related expenses and increased consulting costs [89]. - The consolidated effective income tax rate was 26.0% for Q1 2025, down from 26.9% in Q1 2024, benefiting from U.S. income tax deductions [91]. Intercompany Transactions - The majority of intercompany billings are resolved within 30 days, with approximately $203 million of net unsettled intercompany transactions as of March 31, 2025 [109].

Core Insights - Expeditors International of Washington (EXPD) reported first-quarter 2025 earnings of $1.47 per share, exceeding the Zacks Consensus Estimate of $1.30, with a year-over-year increase of 26% driven by strong air tonnage and ocean volumes [1] - Total revenues reached $2.66 billion, surpassing the Zacks Consensus Estimate of $2.42 billion, marking a 20.8% year-over-year growth [1] Financial Performance - Operating income increased by 24% year over year to $265.85 million, with total operating expenses rising by 20.5% to $2.40 billion [2] - Airfreight services revenues grew by 18.7% year over year to $901.76 million, while ocean freight and services revenues surged by 36.9% to $781.66 million [3] - Customs Brokerage and other services revenues increased by 12.1% year over year to $982.99 million [3] Operational Efficiency - The company maintained an operating efficiency measure in line with its 30% target, with pre-tax operating income growing by 24% from the previous year [2] - Airfreight tonnage and ocean container volume increased by 9% and 8% year over year, respectively [2] Shareholder Actions - During the first quarter of 2025, EXPD repurchased 1.5 million shares at an average price of $117.29 per share [3] Cash Position - At the end of the first quarter, EXPD had cash and cash equivalents of $1.32 billion, up from $1.15 billion at the end of the previous quarter [4]

Financial Performance - Diluted earnings per share (EPS) increased by 26% to $1.47 compared to the same quarter of 2024[6] - Net earnings attributable to shareholders rose by 20% to $204 million, while operating income increased by 24% to $266 million[6] - Revenues grew by 21% to $2.7 billion, driven by increased airfreight tonnage (up 9%) and ocean container volume (up 8%) year-over-year[6] - Total revenues for Q1 2025 reached $2,666,419, an increase of 20.8% compared to $2,206,678 in Q1 2024[18] - Net earnings for Q1 2025 were $204,099, representing a 19.7% increase from $170,400 in Q1 2024[20] - Diluted earnings per share increased to $1.47 in Q1 2025, up from $1.17 in Q1 2024, reflecting a growth of 25.6%[18] - Operating income for Q1 2025 was $265,858, a 23.7% increase from $214,776 in Q1 2024[18] Cash Flow and Investments - The company generated $343 million in cash from operations and returned $177 million to shareholders through stock repurchases during the quarter[8] - Net cash from operating activities for Q1 2025 was $342,622, an increase of 33.4% from $256,904 in Q1 2024[20] - Cash and cash equivalents at the end of Q1 2025 were $1,318,520, compared to $1,370,456 at the end of Q1 2024[20] - Capital expenditures for Q1 2025 totaled $13,152, up from $10,181 in Q1 2024[22] Operational Efficiency - Operating efficiency was maintained at the target of 30%, with pre-tax operating income growing by 24% from the previous year[8] - The workforce increased to 19,203 full-time equivalents, up from 18,403 in the previous year, reflecting a strategic boost in operations and sales[13] Market Trends - Airfreight volumes showed a year-over-year increase of 9%, with March alone seeing a 15% rise, while ocean freight volumes increased by 8% overall[13] - The company is experiencing early signs of a significant decline in China to U.S. ocean volumes, prompting customers to shift shipments to mitigate tariff exposure[7] Assets and Liabilities - The total assets as of March 31, 2025, were $4.76 billion, slightly up from $4.75 billion at the end of 2024[16] - Identifiable assets at the end of Q1 2025 were $4,756,650, compared to $4,488,268 at the end of Q1 2024[22] - The company reported a decrease in accounts receivable by $108,149 in Q1 2025, compared to an increase of $60,542 in Q1 2024[20] Interest Income - The company experienced a decrease in interest income to $9,184 in Q1 2025 from $14,878 in Q1 2024[18] Cybersecurity and Technology - The company is investing significantly in cybersecurity and technology to enhance operational systems and protect against disruptions[8]

Core Insights - Expeditors International (EXPD) reported a revenue of $2.67 billion for the quarter ended March 2025, reflecting a year-over-year increase of 20.8% and surpassing the Zacks Consensus Estimate by 9.95% [1] - The company's earnings per share (EPS) for the quarter was $1.47, up from $1.17 in the same quarter last year, exceeding the consensus EPS estimate by 13.08% [1] Revenue Breakdown - Airfreight services generated $901.76 million, exceeding the four-analyst average estimate of $823.90 million, with a year-over-year increase of 18.8% [4] - Customs brokerage and other services brought in $982.99 million, surpassing the four-analyst average estimate of $905.08 million, marking a year-over-year growth of 12.2% [4] - Ocean freight and ocean services achieved $781.67 million, exceeding the four-analyst average estimate of $677.63 million, with a significant year-over-year increase of 37% [4] Stock Performance - Over the past month, shares of Expeditors International have returned +5.8%, compared to the Zacks S&P 500 composite's +11.5% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]