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With its technological edge over competitors and its fiscal discipline, BofA Securities believes Expeditors International of Washington (NYSE:EXPD) can increase its market share in a fragmented industry, but the company’s margins will remain pressured by excess capacity in ocean and air shipping.
The bank initiates coverage of the logistics company with a Neutral rating and $126 price target, a 5% premium over Friday’s closing price.
Because of its fiscal discipline, absence of any significant debt, Expeditors International (EXPD) has been able to invest consistently in its people and technology and remains focused on long-term expansion in a cyclical industry.
Margins, however, will remain challenged for the company, BofA Securities analyst Ken Hoexter says, given the excess freight capacity over demand. Additionally, there is significant competition from asset-based carriers like Hapag-Lloyd (HLAGF, HPGLY) and Maersk (AMKBY, AMKBF) as well as from growth-focused tech operators like Flexport.
Currently, Expeditors International (EXPD) trades at a premium to its asset-light peers (25.5x 2024 EPS estimates vs 22x for peers), and BofA’s target price is at the upper end of its 15x-28x trading range. Therefore, Hoexter cautions that “near-term upside may be constrained by its higher multiple given continued forwarding earnings pressure.”