We are upgrading our recommendation to Outperform for Expeditors International (EXPD) following second-quarter results. The company’s second quarter earnings surpassed the Zacks Consensus Estimate and the year-ago quarter level on strong airfreight and ocean shipping demand.
Yields declined despite an increase in air and ocean volumes, which led to contracting gross margins. However, as the freight is recovering, we expect yields to stabilize at lower and more normal levels. We also expect Expeditors to benefit from a slow and steady economic recovery.
The company’s strong balance sheet with no debt is encouraging and provides flexibility for internal growth. Over the long term, the company is poised for growth as it plans to expand its presence and operations internationally and invests in new opportunities and services.