Tuesday, Wolfe Research adjusted its stance on Expeditors International (NYSE:EXPD) of Washington, Inc. (NASDAQ:EXPD), elevating the stock from an Underperform to a Peer Perform rating.
The brokerage firm cited the company's performance relative to its peers and indexes, along with expectations for earnings growth based on robust ocean freight rates.
Expeditors International's stock has seen a 7% decline year-to-date, lagging behind Wolfe Research's Transport Index, which has dropped by 4%, and significantly underperforming compared to the flat performance of C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW) and the S&P 500's 11% increase.
In light of stronger ocean rates, Wolfe Research has increased its earnings per share (EPS) estimates for the remainder of the 2024 calendar year. For the second quarter of 2024, the EPS estimate has been raised by 3% to $1.24, positioning it 3% above the consensus.
Additionally, the full-year 2024 EPS projection has been lifted by 3% to $4.95, now 2% higher than the consensus. However, the firm has maintained its 2025 EPS estimate at $4.80, which remains 7% below the consensus of $5.15 for the next year.
At the revised EPS estimates, Expeditors International's stock is trading below 24 times the 2024 EPS and under 25 times the 2025 EPS forecasts. This valuation is higher than its 5-year and 10-year average of 21 times.
Despite the elevated valuation relative to Expeditors International's historical averages, the firm notes that the stock's valuation based on its 2024 EPS estimates aligns with or is lower than other non-asset and asset-light forwarders.
Wolfe Research acknowledges that if the current favorable rate environment persists, Expeditors International could be one of the few transportation companies to potentially see an EPS increase over the next few quarters. Consequently, the firm has decided to adopt a neutral stance by upgrading the rating to Peer Perform.
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