Stifel Upgrades Expeditors International Of Washington To Buy: Here's Why

• Expeditors International of Washington EXPD shares are up more than 7 percent year-to-date, trading close to the higher end of their 52-week range of $38.14 to $50.08, this week.
• Stifel analyst David G. Ross upgraded the rating on the company from Hold to Buy, while maintaining the price target at $56.
• With a refocus on growth, Ross believes the company would continue to take market share, as competition restructures.

Analyst David Ross expects Expeditors to continue to generate growth in volumes and capture market share through 2017. Global trade is expected to grow in low single-digits and trade in and out of China is likely to increase.

Ross added that Expeditors will gain market share by capturing business from struggling competitors and continue to focus on “new growth lanes, the largest we believe being Asia-Europe, where it has little share at present.”

Great people and IT were what “freight forwarding all boils down to,” and Expeditors had “a uniform global IT platform, allowing for its well-trained and highly-motivated people (incentivized with significant variable comp based on operating profit) to efficiently provide their customers with quality service,” Ross wrote.

In the report Stifel noted, “Expeditors is well-run and non-asset-based with over $1bn in net cash on its balance sheet, so a flight to quality should have it outperform lesser peers/other transports, in our view, in a market downturn.”

Ross expects the company to use its cash balance to continue its share repurchases. Expeditors repurchased shares at an average price of $47.06 in 1H15. Thus, the company is likely to be “active and supporting the shares at current levels or below.”