Three to watch: Musser steadying Expeditor’s helm

Expeditors LogoTo build one of the most prosperous and fast-growing forwarding businesses in a competitive field is an impressive achievement. To continue that record of success after taking the reins from a charismatic and outspoken leader, following soon after one of the worst economic crises in history, is an altogether different – yet no less impressive – accomplishment. In the former scenario, Peter Rose, the retired CEO and chairman of Expeditors International, is now considered a legend in the freight logistics world. In the latter, Rose’s son-in-law, Jeffrey Musser, who stepped into the president and CEO position in March 2014, has ensured that Expeditors has hardly skipped a beat in its pursuit of continuous double- digit profit growth.

The latest figures from the Expeditors’ third quarter of 2015 tell the tale: Despite a 3.2 percent drop in revenues, a slowdown in volume growth and a turgid world economy, the Seattle based company saw net income rise 15.5 percent, year-over-year, to US$119 million, while net revenue increased 11.1 percent to $570 million and operating income soared 20.6 percent, y-o y, to $192 million. All three metrics were records for Expeditors, which was already one of the world’s most profitable forwarding operations.

But that’s not the end of it. Operating margins for Q3 hit a record-high 33.7 percent – the fifth consecutive quarter the company exceeded its 30 percent margin goal – while the net margin reached 20.8 percent. To put these figures in perspective, Kuehne + Nagel, one of the largest and best-run forwarders on the globe, reported Q3 operating and net margins of 14.5 and 11.7 percent, respectively.

Net revenue from airfreight forwarding in Q3 was up 15.3 percent from Q2, reaching $195 million, while tonnage rose 3 percent over the same period. Net revenues for customs brokerage and other services rose 5.4 percent to $231 million, while its operating margin increased by 1.1 points to reach a staggering 53.4 percent. These figures are no fluke; they’re roughly consistent with growth for the first nine months of 2015 and for most of 2014.

To what does Expeditors owe for such a rock-star quarterly performance? The notoriously press-shy forwarder doesn’t like to tip its hand and declined to provide a comment for this article. But in the company’s earnings release statement in early November, Musser said that he prefers to avoid the easier path of mergers and acquisitions, and take the less-travelled route of cost-cutting and capitalizing on favorably priced spot markets. “We remain focused on the organic growth of our people, systems and businesses,” he said. “We continue to believe that this model provides the highest long-term value to our employees, customers and shareholders.”

In a recent assessment of Expeditors’ third-quarter numbers, analysts at BB&T also remarked that while most of the forwarder’s competitors were focused on acquisitions, Expeditors was able to benefit indirectly. “During heavy times of M&A activity, Expeditors has been able to pick up quality employees from competitors who may become disenchanted with the buyer, as well as customers who may have experienced service disruptions from integration issues.”

To assume control of a successful company with such a strong 30-year imprint from a strong CEO like Rose can have its downsides, including the mathematical reality that these cartoonishy high growth rates will have to come down at some point – probably on Musser’s watch. History is littered with scary examples of long-successful businesses that declined after a change in CEOs. But if his first 18 months in the front office are any indication, Musser seems to understand that the less he fiddles with a well-oiled machine, no matter how tempting it may be, the more likely the company will continue on a steady course of growth.

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