Third quarter earnings were disappointing as Expeditors International of Washington reported a 17% decline in net earnings to $88,490, total revenue declined 5% to $1.5bn and net revenue declined 6%.
According to the company's CEO, "During our 30+year operating history, we have never had the kinds of convergence of industry challenges in both our customers and service providers' industries we have experienced this year." Financially struggling air and ocean crariers, airfreight markets adapting to smaller, lighter freight, lackluster consumer and business demand and global economic uncertainty all attributing factors to these challenges.
The non-asset based 3PL continues to feel the effects of a slow global economy - particularly along the transpacific route, historically its strongest trade lane. However, for this trade lane, according to a research note from Stifel Nicolaus, the company is now facing increasing competition and possible market share loss to Kuehne + Nagel and DHL for airfreight and Kuehne + Nagel, DHL and Panalpina for ocean freight
A bit worrisome is the fact that despite a possible rise in September airfreight thanks to high tech product launches, the company still reported a 2% decline in airfreight kilos for that month. For the quarter, Expeditors reported a 9% decline in airfreight kilos.
For ocean freight, Expeditor reported a 4% decline in FEUs, again, a bit surprising as increases in ocean freight tonnage were imported to the US during July especially as shippers shipped early in preparation of a possible east coast port strike that was temporarily averted.
For the quarter, all geographic regions reported declines in net revenue. Europe/Africa reported the steepest decline of 10.2% from third quarter 2011 followed by Asia Pacific which declined 9.7%. As a percentage of total net revenue, the US was the only geographic region to report a gain. This region now represents over 40% of total net revenue compared to 38% for third quarter 2011. Not surprising, Asia Pacific's share of net revenue fell from 32.9% for third quarter 2011 to 31.6%. Expect Expeditor to make adjustments to its sales and operations to balance the share of net revenue more evenly across all of its reporting geographic regions.
Perhaps Pete Rose, CEO of Expeditors summed up the feelings of many logistics and transportation providers best, "Years come and years go and like 2009, we'll be glad to see this one end."
