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Expeditors (EXPD) Scales a 52-Week-High, Gains 4% Since Q1


Expeditors International of Washington, Inc.’s EXPD impressive first-quarter 2018 results and the subsequent dividend hike seem to have favored its stock. Evidently, the company scaled to a 52-week high of $73.04 on May 11, before retracing a bit to close the session at $72.35.

Also, shares of the company have rallied 22.7% in the last six months, comfortably outperforming its industry’s gain of 11.5%.

Catalysts Behind the Upsurge

Last week, Expeditors reported better-than-expected first-quarter results. The highlight of the report was a 20% year-over-year increase in revenues. Growth was witnessed across all major divisions of the company.

Volumes of both Airfreight tonnage and ocean container were up 5% on a year-over-year basis. Gross profit increased 21% year over year to $635.84 million in the first quarter of 2018. The earnings report impacted the stock positively. As a result, shares of Expeditors have gained 4% since the earnings release on May 8.

This apart, the stock’s outperformance was backed by the 7.1% hike in semi-annual cash dividend announced a day after the earnings release. Following the raise, the dividend increased to 45 cents per share (annualized 90 cents per share), of which, the first instalment will be payable Jun 15, 2018 to shareholders of record as of Jun 1.

Furthermore, this Seattle, WA-based company has been a beneficiary of the Tax Cuts and Jobs Act enacted in December 2017. As a result of the tax reform, the company’s effective tax rate for the first quarter was 31.3% compared with 37.3% in the year-ago quarter. We believe that the hike in the dividend payout is a result of the savings induced by the new tax law.

A Broker Favorite

We note that earnings estimates for Expeditors have exhibited a healthy uptrend. Over the last seven days, the stock has witnessed the Zacks Consensus Estimate for second-quarter earnings being revised 8.8% upward. Likewise, the same for current-year earnings has witnessed an upward revision to the tune of 4.9% in the same time period.

Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. The direction of estimate revisions serves as an important pointer when it comes to the price of a stock.

Other Positive Metrics

Expeditors’trailing 12-month return on equity (ROE) supports its growth potential. Not only has the company’s ROE of 24.8% displayed an upward trend over the past year, it compares favorably with ROE of 17.8% for its industry and 16.6% for the S&P 500 index. This reflects the fact that the company is efficient in using shareholders’ funds.

Taking into account the above-mentioned tailwinds and the favorable readings, we believe that the current price represents an attractive entry point for investors. The carrier’s Zacks Rank #1 (Strong Buy) also supports our view. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moreover, the company’s Momentum Score of A highlights its short-term attractiveness. Back-tested results show that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform others.

Other Stocks to Consider

Investors interested in the broader Transportation space may also include Echo Global Logistics, Inc. ECHO, SkyWest, Inc. SKYW and Aircastle Limited AYR, sporting the same bullish rank as Expeditors.

Shares of Echo Global and SkyWest have gained more than 50% and 58%, respectively, in a year’s time. Meanwhile, Aircastle has witnessed the Zacks Consensus Estimate for current-year earnings being revised 2.3% upward over the last 30 days.

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