We expect the Seattle, WA-based Expeditors International of Washington (EXPD Quick QuoteEXPD - Free Report) to report better-than-expected earnings in the second quarter of 2016. Results are scheduled to be out on Aug 2.

In the first quarter of 2016, the transportation company had reported lackluster results with earnings and revenues missing estimates. All three primary segments – Airfreight Services, Ocean Freight and Ocean Services and Customs Brokerage and Other Services – performed disappointingly in the quarter.

Our quantitative model, however, hints at an earnings beat in the second quarter. Here’s why:

Expeditors has the right combination of the two key ingredients – positive Earnings ESP and a Zacks Rank #3 or better – for increasing the odds of an earnings beat.

Zacks ESP: Earnings ESP for the company stands at +3.45% as the Most Accurate estimate is 60 cents while the Zacks Consensus Estimate is 2 cents lower.

Zacks Rank: Expeditors currently carries a Zacks Rank #3.

The favorable combination makes us optimistic about an earnings beat at Expeditors.

As a caution, we advise investors to avoid Sell-rated (#4 and 5) stocks going into an earnings announcement.

What's Driving the Better-than-Expected Earnings?

Despite the miss in the first quarter of 2016, Expeditors has an impressive earnings history having outshined the Zacks Consensus Estimate in three of the last four quarters, at an average of 4.55%. We are impressed with the company’s emphasis on cost reduction to drive the bottom line. We are also positive about the company’s efforts to reward shareholders through dividend payments.

In May 2016, the board of directors at Expeditors approved a hike in its dividend payout. The board declared a semi-annual cash dividend of 40 cents per share (annual payout of 80 cents per share, up 11.1%). We expect a detailed update on the issue during the second-quarter conference call.

However, we expect the top line to remain under pressure in the second quarter as well due to soft air freight and ocean freight revenues.

Other Stocks to Consider

Here are some other transportation companies you may want to consider instead as our model shows they also have the right combination of elements to post an earnings beat this quarter.

United Parcel Service (UPS Quick QuoteUPS - Free Report) has an earnings ESP of +1.40% and a Zacks Rank #3. The company will report second-quarter results on Jul 29.

XPO Logistics (XPO Quick QuoteXPO - Free Report) has an earnings ESP of +15.79% and a Zacks Rank #3. The company will release second-quarter results on Aug 3.

LATAM Airlines Group S.A. has an earnings ESP of over +100% and a Zacks Rank #2. The company is expected to report second-quarter results on Aug 11.

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