Expeditors International of Washington EXPD is thriving with an increase in volumes, which is boosting its top line. Shareholder-friendly initiatives are encouraging. However, EXPD is grappling with geopolitical uncertainties and elevated operating expenses.

Factors Favoring EXPD

The robust growth in air tonnage and ocean volumes had a positive impact on all areas of EXPD during the third quarter of 2024. Airfreight tonnage rose 19%, while ocean container volumes grew 12%. Rates also saw widespread increases across all regions, fueled by sustained high demand in direct e-commerce, which absorbed available air freight capacity and drove up rates for exports from North Asia.

Expeditors has demonstrated a strong commitment to rewarding its shareholders through dividends and share buybacks. In May 2024, the company announced a 5.8% increase in its semi-annual cash dividend, continuing the trend of dividend hikes, as it had also raised its dividend in 2023. Moreover, Expeditors has been active in share repurchases, buying back 1.2 million shares in the third quarter and 2.6 million shares in the second quarter of 2024, at average prices of $118.47 and $116.29 per share, respectively.

EXPD exited the third quarter of 2024 with a current ratio (a measure of liquidity) of 1.74. A current ratio of greater than one is always desirable as it indicates that the company has enough cash to meet its short-term obligations.

EXPD: Key Risks to Watch

EXPD continues to grapple with the impact of geopolitical events on pricing and freight flow, in the third-quarter of 2024. Ocean transit times remained extended as carriers avoided the Red Sea, disrupted by concerns over potential port strikes. Meanwhile, air capacity remained scarce and costly, making it an impractical widespread alternative for most shippers.

The company anticipates that the global freight markets and pricing are likely to remain volatile in the near future. Expeditors is struggling with increased operating expenses, hurting its bottom line. In the third quarter of 2024, total operating expenses rose 36.7% year over year due to increased ocean freight and ocean services.

Ocean freight and ocean services, which represent 29% of total operating costs, increased 102.2% year over year. Airfreight services expenses jumped 43.3% year over year, pushing up the total operating costs.

Owing to such headwinds, EXPD shares have declined 13.9% over the past year compared with the industry’s fall of 10.3% in the same period.

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EXPD’s Zacks Rank

EXPD currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the Zacks Transportationsector may consider Alaska Air Group ALK and C.H. Robinson Worldwide CHRW.

Alaska Air Group currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. ALK has an expected earnings growth rate of 35.7% for the current year.

The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 23.2%. ALK shares have surged 93.9% in the past year.

C.H. Robinson currently carries a Zacks Rank #2 (Buy). CHRW has an expected earnings growth rate of 10.9% for the current year.

The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average beat of 10.3%. Shares of CHRW have risen 17.2% in the past year.

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