Nothing but down arrows for Expeditors in 4th quarter
Bottom line suffers as revenue declines as well as costs
Expeditors saw all its key financial metrics sag in the fourth quarter. (Source: Shutterstock)
For Expeditors International, everything pointed down in the fourth quarter compared to a year earlier, and not a lot of change is foreseen in the first half of this year.
Revenues at the air- and ocean-focused 3PL were down, but so was the cost of acquiring the air and marine transportation that is at the heart of Expeditors activities. In a labor market still marked by a tight pool of workers along with higher inflation, salaries and other operating expenses declined 8% from a year earlier. That line item was down even though headcount rose to 20,302 from 19,588 a year earlier.
Notably, operating income was down 47% from the fourth quarter of 2021.
The softer outlook in his companys market led CEO Jeffrey Musser to say in a prepared statement that Expeditors short-term outlook is somewhat uncertain.
That uncertain outlook is a result of a difficult economic environment and the resetting of supply and demand, which has a direct impact on available capacity and pricing, Musser said.
We plan to move forward with a sharp eye on aligning expenses with revenues, particularly over the next one or two quarters, Musser said in the statement. Our focus will be on maintaining our existing accounts and gaining new business, while reducing overall expenses. Just as we quickly configured our operations to accommodate unprecedented chaos and complexity during the pandemic, we now need to address our operations for a post-pandemic environment of soft demand and pressured pricing.
Expeditors (NASDAQ: EXPD) does not hold an earnings call with analysts. It does respond to submitted questions from investors in an occasional 8-K filing with the Securities and Exchange Commission but has not done so since August.
Despite the tremendous volatility in Expeditors business, benchmark measurements on its stock price reveal a stock that outwardly looks balanced. In the last 12 months, Expeditors stock is up about 1.7%. In the last month, it is up about 1.2% and in the last three months, its a 4.9% decrease. But the stock, which closed Friday at $111.40, is up about 25.5% from a 52-week low of $86.08 posted in September.
Early returns on the Expeditors earnings report were not positive. At approximately 10 a.m. Tuesday, the stock price was down 5.32% to $109.47.
The fourth quarter was far worse than expected, Musser conceded in his statement. As pandemic-related bottlenecks eased and air and ocean supply/demand imbalances began to dissipate in the first half of the year, average buy and sell rates progressively declined to varying degrees, as they typically do until they suddenly began to plummet simultaneously and faster than we would have expected in the fourth quarter.
And not surprisingly, that decline in buy and sell rates happened with a drop in demand, which Musser said was softer than we would have expected.
Many shippers had stockpiled inventory and pulled orders forward early in 2022, in a concerted effort to avoid the worst of the supply chain bottlenecks that materialized during the pandemic, when abrupt shutdowns and stay-at-home orders transformed how we live and do business, Musser said. Those conditions, which were already starting to ease throughout the first three quarters of 2022, quickly reversed course as we entered the fourth quarter and shippers swiftly adapted to increased consumer caution and slowing demand for their products, while also battling inflation and tighter financing. We were especially impacted in North Asia, our second largest geography, as the lingering effects of the lockdowns contributed to the largest declines in our air tonnage and ocean volumes in at least a decade.
The weakness in volume was clear in the tonnage figures provided by Expeditors. The quarter by quarter sequential declines from a year earlier accelerated over the three months.