Expeditors reports improved net revenue and growing volumes

Despite little change in its total revenue of $1.5bn versus the same period in 2012, Expeditors International reported a 4.0% increase in net revenue to $482m for the third quarter of 2013. Peter J. Rose, Chairman and CEO of the company also reported that its operating margin remained above its efficiency target point of 30% for the quarter.

Air and ocean freight volumes increased 3.0% and 9.0% respectively. Rose noted that there was particularly high volatility within the ocean freight market and remarked that Expeditors decided to maintain market share by absorbing a large proportion of carrier cost increases which the company judged “to be temporary and unsustainable.” As such, ocean freight revenue minus expenses indicated a 1.1% decline to $115.5m from third quarter 2012. Within some lanes, however, the company indicated it had gained market share.

An air freight peak season was anticipated for September but did not materialize, resulting in a 2% decline in air freight volumes for the month. Instead, evidence suggests that some of the expected September volume appeared in October. This is, in part, due to planned new product launches and preparations for the November and December holiday season. Total air freight revenue increased 0.9% to $628m but subtracting out expenses, net revenue increased over 7.0% to $161.4m, indicating the company was able to successfully manage air freight costs.

Customs border and other services continue to be a growing division for the company. Total revenue increased 6.1% to $381.8m. When expenses are removed, net revenue remained healthy increasing 3.7% to $205.1m.

By region, Expeditors reported positive growth rates. “Other North America” reported the strongest increase at 12.1% to $26.3m, while the Asia-Pacific region reported the weakest increase at 0.2% to $147.3m. The weaker growth for Asia-Pacific may be an indication of the slowing export demand from this region and also the increasing competition along the Trans-Pacific lane.

Overall, the third quarter was not bad. In comparison to two of its competitors, Kuehne + Nagel and Panalpina, Expeditors’ air and ocean revenues were a bit behind however, in terms of volumes, Expeditors achieved a greater increase in ocean freight volumes, 9.0%, for the quarter versus Kuehne + Nagel, +1.0%, and Panalpina, +8.0%.

For air freight volumes, Expeditors’ increase of 3.0% appears to be in line with the competition. Kuehne + Nagel reported a 2.6% increase, while Panalpina noted a 4.0% increase.

The freight forwarding market remains challenging as the ocean freight market faces declines in rates and excess capacity. Meanwhile, air freight is in recovery mode – albeit a very sluggish one – and in the midst of significant change as shippers prefer to utilize its services more for high value goods and special circumstances rather than regular, daily use.