Moving products around the globe is an expensive proposition. Although many companies in the space spend heavily on their ships, trucks, and trains, Expeditors International of Washington (NASDAQ:EXPD) doesn’t spend a dime on such things. That makes it an interesting play on an increasingly global economy.
A World of Opportunities
The products you buy in a store often have little stickers that say such things as “made in China” or some other far off land. While we don’t think about that too much, it means that someone had to get the shirt, or other item, from China to, say, Kansas. There are only two ways that can happen. Either someone put the shirt on a plane and flew it to Kansas or someone put it on a boat.
But there’s no coastal port in Kansas, so if the shirt came by boat it had to be put on a truck or train. If it went by truck, it could go right to the store. If it went by train, it had to be put on a truck once the train got to Kansas. If that sounds like a lot of work just to get a shirt from China to Kansas, it is. There are companies that specialize in getting this done.
Expediting the Processes
Expeditors International of Washington (NASDAQ:EXPD) is unique in the freight business because it doesn’t own any assets. No ships, no trucks, no planes. It works as a middle man, crafting agreements with the companies that have the shipping assets to ensure their fleets are full of goods. On the other side, it helps customers get their wares from the factory to the store without the customer having to figure out the process themselves.
It’s been a good business. The company’s top line grew steadily between fiscal 2003 and 2011, dropping only in 2009, the tail end of the 2007 to 2009 global recession. Earnings grew steadily, too, dipping only slightly in 2009. Dividends, meanwhile, have been increased annually for more than a decade.
The top and bottom lines, however, both fell slightly in 2012. The continued economic troubles in Europe and the still slow recovery in The United States are largely to blame. However, it is in difficult times that Expeditors’ business model shines. Since it doesn’t own any of the shipping assets, it doesn’t have to pay for their upkeep. That sets a low bar for profitability.