Expeditors International of Washington EXPD is thriving with robust demand from Asia, which is boosting its top line. Shareholder-friendly initiatives are encouraging. However, EXPD is grappling with geopolitical uncertainties and elevated operating expenses.

Factors Favoring EXPD

Expeditors’ December-quarter results highlight its ability to thrive in challenging conditions. Despite limited air capacity, the company is effectively navigating the turbulence, showcasing its expertise in finding solutions that keep customer freight moving efficiently. This ability to adapt and perform under pressure underscores Expeditors' resilience and strategic focus, reinforcing its position as a reliable partner for customers even in volatile markets. Strong demand for technology products represents an added tailwind for EXPD.

EXPD’s commitment to returning capital to shareholders through stock repurchases and dividend payments is commendable. In 2024, the company repurchased 7.1 million shares at an average price of $119.47 per share compared to 12.1 million shares repurchased in 2023 at a lower average price of $114.68 per share. While the number of shares repurchased was slightly lower in 2024, the higher average price indicates a more strategic and measured approach. Additionally, the 5.8% increase in the dividend payout in 2024 to $1.46 reflects strong cash flow and underscores a positive outlook for the company’s future growth and financial health.

Robust liquidity is another tailwind for Expeditors, as the company ended 2024 with a current ratio (a measure of liquidity) of 1.77. A current ratio of greater than one is always recommendable as it indicates that the company has sufficient cash to meet its short-term obligations.

Owing to such tailwinds, EXPD shares have rallied 14.1% year to date compared to the industry’s fall of 3.3% in the same period.

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EXPD: Key Risks to Watch

EXPD is grappling with disruptions in ocean capacity due to front-loading and ongoing Red Sea route avoidance, along with uncertainty surrounding the impact of potential U.S. policy changes on de minimis exemptions. Geopolitical tensions, uncertain national policies and heightened market volatility are adding to the unpredictability.

Expeditors anticipates that the global freight markets and pricing are likely to remain volatile in the near future. The company is struggling with increased operating expenses, hurting its bottom line. In the fourth quarter of 2024, total operating expenses rose 12% year over year due to increased ocean freight and ocean services.

Airfreight services, which represent 30.5% of total operating costs, rose 26.4% year over year. Ocean freight and ocean services expenses jumped 47.5% year over year, pushing up the total operating costs.

EXPD’s Zacks Rank

EXPD currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Investors interested in the Zacks Transportation sector may also considerSkyWest SKYW and United Airlines UAL.

SkyWest currently sports a Zacks Rank #1 (Strong Buy)

SKYW has an expected earnings growth rate of 16% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 16.7%. Shares of SKYW have risen 32.1% over the past year.

United Airlines currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here. 

UAL has an expected earnings growth rate of 22.1% for the current year.

The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average surprise is 22.9%. Shares of UAL have surged 93.2% in the past year.

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United Airlines Holdings Inc (UAL) : Free Stock Analysis Report

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This article originally published on Zacks Investment Research (zacks.com).

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