Earnings season looms, with all eyes on the 'health' of Expeditors
The financial third quarter closed on Friday, and now all eyes are on what’s next ...
US freight forwarder Expeditors saw third-quarter revenue and profits increase as efforts to raise prices with shippers paid off.
Nearly a year of rising ocean and air freight rates has left many forwarders with increasingly diminished margins, but Expeditors said yesterday that a 15% and 12% increase in revenues and operating income respectively was due to a concerted effort to restore margins.
President and chief executive Jeffrey Musser said: “This quarter represents the culmination of the efforts from our staff over the last few quarters.
“We’ve spent a significant amount of time working with our customers to bring pricing back in line with the changes that have taken place in the market.”
Earlier this year, after half-year results which saw revenues grow 11% but operating income fall 5%, the company told investors that after several years during which shippers had “have enjoyed a favourable pricing and capacity environment”, there would be an “adjustment period”.
During this, shippers would become “more aware of current market conditions, including space constraints and buy rate volatility”, and were already “starting to gain an appreciation for the new market dynamics surrounding pricing and capacity”.
This week, that prediction appears to have been well founded, as Expeditors focused more on pricing than market share, according to Mr Musser.
“While our focus has shifted somewhat from volume growth – due to the margin impacts that can occur – we continued to record strong performance in all of our services, winning new business and growing volumes with existing customers.
“We think the numbers speak for themselves with regards to the quality of volume growth that we are experiencing,” he said.
Although it did not report actual freight volumes, the company said that year-on-year air freight tonnes grew 12% over the quarter and ocean teu by 4%, both levels generally in line with global volume growth.
Total revenue for the quarter came in at $1.8bn and operating income was $186.9m. Air freight revenue grew 18% year-on-year to $735m, sea freight by 14% to $563m and customs brokerage services by 13% to $504m.
Chief financial officer Bradley Powell said: “Despite the highly unpredictable rate environment, our people exercised careful restraint to bring our benchmark operating income as a percentage of net revenue back above 30% for the quarter, as compared with the first two quarters of 2017.
“We are managing expenses well, as our growth in volumes has significantly outpaced our growth in headcount. At the same time, we continue to make critical investments in our technology and create additional efficiencies for both ourselves and our customers,” he added.
Expeditors’ global headcount grew just under 5% to reach 16,648, with most of the new staff hired in North America and Europe.
Investors welcomed the figures, yesterday’s share price was up 8% to a record $62.