EXPD: Expeditors at Odds With Economic Data

By William Trent, CFA of Stock Market Beat

Stock Market Beat Large Cap Watch List member Expeditors International (EXPD) reported earnings this morning, and the results would have looked really good had the market not expected better. Sales of $1.24 billion were below the $1.28 billion consensus figure, and earnings per share were $0.28 instead of the expected $0.31. As a result, the shares are down nearly 12%.
Expeditors Announces 23% Increase in 2006 Annual Earnings: Financial News – Yahoo! Finance

“We’ll take these fourth quarter results, particularly given the rather stiff comparisons we were up against,” said Peter J. Rose, Chairman and Chief Executive Officer. “Growth in airfreight was good, particularly viewed in context of the blowout 4th quarter of 2005. Ocean freight volumes were very strong throughout the entire quarter and our brokerage product just continues to reliably roll along, taking market share as it goes. Our ability to provide alternatives in both the air and ocean transportation markets, with consistent global service, quality and visibility standards coupled with a seamless brokerage product is providing some definite advantages,” Rose remarked.

These comments are somewhat puzzling given that Expeditors is in the business of… well… expediting global shipping. And that business appears to be booming, given today’s trade data. According to the Reuters report:

The monthly trade gap totaled $61.2 billion, up 5.3 percent from November as oil prices rebounded and Americans imported record amounts of consumer goods and autos and auto parts.

The December shortfall exceeded the median forecast of $59.5 billion made by Wall Street analysts surveyed before the report. It also marked the tenth time in 2006 that the monthly deficit exceeded $60 billion.

U.S. exports of goods and services, which have benefited recently from stronger foreign economic growth and a decline in the value of the dollar, totaled a record $125.5 billion in December.

If Americans are both importing and exporting record amounts of goods (and more than observers were expecting) how can Expeditors be taking share when they report less than observers were expecting? Without the answer to that puzzle, it is no mystery why Expeditors shares are falling today.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

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