Expeditors – A step above its peers

Expeditors International of Washington is a global logistics services company. It provides an international network to support the movement of goods for its customers. The company is one of the largest U.S.-based forwarders of air freight from the Far East. 

Expeditors International primarily provides airfreight services (36% of 2019 revenues), ocean freight transportation (27%), and customs brokerage (37%). Its other services include order management, time-definite transportation, warehousing and distribution, cargo insurance, and customized logistics solutions. Expeditors International operates through a unified technology system and a global network of 331 locations in 109 countries on six continents.

The company generally ships goods for electronics, high technology, healthcare, aerospace and aviation, manufacturing, oil and energy, automotive, and the retail and fashion industry.

Expeditors International provides a complete range of global logistics services to a diversified group of customers. The company is well diversified across geographies and industries. It has a presence across the Americas, Asia, Europe, Middle East, Africa, and India.

Investment Data

Revenue Growth & Market Exposure

Expeditors’ solutions play an important role in optimizing customer logistics and supply chains. The company also tailors customer-specific solutions based on its customer’s needs. Expeditors International maintains a single, globally-connected platform controlling its logistics operations providing greater efficiency. As a leading global logistics services provider,  Expeditors offers a full suite of global logistics services and a seamless international network to support the movement of goods. The company serves a diversified group of customers, both in terms of industries and geographic locations. Over the years, Expeditors has developed an understanding of its customers’ logistics and supply chain needs and is well-positioned to cater to their specific needs. These services are offered across the globe on a single technology platform.

Expeditors International continues to expand its global logistics solutions by additional value-added services and industry-specific offerings. It also introduces new systems enhancements to benefit its supply chains from time-to-time. The company remains focused on expanding its business in North America, integrating its European-Asian Pacific and European-North Americas interests and building a stronger import presence in China. It is growing organically and also through acquisitions.

Expeditors International has extensive expertise in ocean and freight with a profitable customs brokerage business. Its operating income was, however, negatively impacted by the disruption caused by COVID-19 in the latest quarter. A well-designed enterprise technology platform and a global logistics network are Expeditors International’s key competitive strengths. 

Dividends

Expeditors International is a Dividend Aristocrat and pays dividends semi-annually. The company has increased its dividend payout for the past 11 consecutive years. Its average dividend per share growth stands at over 10% CAGR per year in the last decade and the company last raised its dividend by 4%. It has an average dividend yield of 1.4% and a reasonable payout ratio of 31%. Expeditors International has also maintained its EPS growth in the double-digit range in the last decade. The company has a low cash payout ratio suggesting that its dividends are well covered by both its cash flow and profits. Expeditors International also has a discretionary stock repurchase plan. During 2019 the company repurchased 5.3 million shares and paid dividends of $1.00 per share to its shareholders.

A low payout ratio leaves enough capital for the management to fund its future growth opportunities while also rewarding shareholders. Expeditors’ strong technology platform provides comprehensive visibility and advanced analytics that creates greater efficiency and value and is constantly monitored for the applicability of new emerging technologies. The company invests aggressively in the maintenance and enhancement of its systems in order to meet its customer demands. Its high margin businesses are strong cash flow generators. Expeditors’ balance sheet and cash flow are both strong. As on March 31, 2020, it had $700 million more in cash on its books than debt. The cash-flow is more than enough to cover its dividends. Given its low payout ratio at 35% and investment in futuristic opportunities, the company should continue its dividend growth streak in the future as well. 

Competition

The global logistics services industry is fiercely competitive. Expeditors International does not compete for overnight courier or small parcel business. The company faces competition from both the niche players and larger entities like C.H. Robinson and Landstar System. It also competes with new technology-based entrants in the industry.

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawYieldPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
NYSE:UPSUPSUnited Parcel Service Inc.IndustrialsIntegrated Freight & Logistics0.65142.76100.5228.9125.424.940.02832.830.817844.040.100086Consumable - DiscretionaryNONONONOUSA1
NYSE:FDXFDXFedEx CorporationIndustrialsIntegrated Freight & Logistics0.64168.4044.1134.3625.424.900.01541.540.530642.600.2098105Consumable - DiscretionaryYESYESNONOUSA1
NASDAQ:EXPDEXPDExpeditors International of Washington Inc.IndustrialsIntegrated Freight & Logistics0.5984.5114.0625.5625.423.310.01231.230.314221.040.089586Consumable - DiscretionaryYESYESYESNOUSA1
NASDAQ:CHRWCHRWCH Robinson Worldwide Inc.IndustrialsIntegrated Freight & Logistics0.5693.7212.6227.3025.423.430.02182.180.594842.040.071076Consumable - DiscretionaryNOYESNONOUSA1

Bottom Line

Expeditors’ global network is well-positioned to meet diverse and complex global logistics and supply chain needs of customers. As countries remain locked down in the face of a global pandemic, customers chose to cut down the discretionary movement of goods between borders. The rising trade conflict between countries is also having an adverse effect on the business of logistics companies. Expeditors International expects disruptions from COVID-19 to continue for the remainder of 2020. However, the company’s long payment history grants it a solid ground.

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.
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