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What's in Store for Expeditors (EXPD) This Earnings Season?

Expeditors International of Washington, Inc. EXPD is slated to report third-quarter 2017 results on Nov 7.

Last quarter, the company’s earnings (on an adjusted basis) of 60 cents per share were in line with the Zacks Consensus Estimate. However, the bottom line declined 4.76% on a year-over-year basis due to higher costs.

Revenues of $1,672 million topped the Zacks Consensus Estimate of $1,633 million. In fact, the top line improved 13% from the year-ago figure.

Let’s see how things shape up for this announcement.

Factors Likely at Play

Higher operating expenses are likely to hit the company’s bottom line in the third quarter. In fact, increased volumes might lead to higher operating expenses at all three of primary divisions — Airfreight services, Ocean freight and ocean services and Customs brokerage and other services — of the company.

Personnel expenses are also likely to be high owing to higher headcount. As the company derives a significant chunk of its revenues from outside the United States, it is exposed to foreign exchange related risks. Consequently, adverse foreign currency movements are liable to hurt results as well.

However, the top line is anticipated to improve in the quarter. Despite the prevalent imbalance between demand and supply in the Airfreight market, volume growth is likely to drive revenues at this flagship division. The Zacks Consensus Estimate for the Airfreight services segment’s third-quarter revenues is pegged at $692 million, higher than the $672 million reported in the previous quarter.

Total revenues from the Ocean freight and ocean services unit is also expected to increase due to volume growth. The Zacks Consensus Estimate for the segment’s third-quarter revenues is pegged at $547 million, higher than the $529 million reported in the second quarter of 2017.

The Zacks Consensus Estimate for the Customs brokerage and other services segment’s third-quarter revenues is pegged at $476 million, higher than the $472 million reported in the last quarter.

What Does Our Model Say

Our proven model does not show that Expeditors will beat earnings in this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. However, that is not the case as highlighted below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Expeditors carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks ESP: Expeditors has an Earnings ESP of -0.28%, which acts as a spoiler. The Zacks Rank combined with a negative Earnings ESP leaves the surprise prediction inconclusive.

Conversely, we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Investors interested in the broader Transportation sector may consider the following companies, as they have the right combination of elements to post earnings beat this quarter:

Triton International TRTN has an Earnings ESP of +2.04%. The Zacks #3 Ranked company is scheduled to report third-quarter earnings numbers on Nov 8.

LATAM Airlines LTM has an Earnings ESP of +15.94% and a Zacks Rank #3. The company will report third-quarter 2017 results on Nov 15.

Diana Shipping DSX has an Earnings ESP of +1.22% and a Zacks Rank #3. The company will report third-quarter 2017 results on Nov 21.

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Triton International Limited (TRTN): Free Stock Analysis Report
 
Diana Shipping inc. (DSX): Free Stock Analysis Report
 
Expeditors International of Washington, Inc. (EXPD): Free Stock Analysis Report
 
LATAM Airlines Group S.A. (LTM): Free Stock Analysis Report
 
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