EXPEDITORS INTERNATIONAL OF WASHINGTON INC (EXPD) stock intrinsic value fair value estimate & owner earnings analysis

Expeditors International is a global freight forwarder and customs broker. It buys air and ocean cargo space wholesale and resells it, moves shipments door to door, clears them through customs in dozens of countries, and runs some warehousing and distribution. It owns almost no aircraft or ships, so it needs very little capital: capital spending was $53 million in 2025 against $57 million of depreciation, and the company has essentially no borrowings. At June 30, 2026 it held $1.03 billion of cash. It pays a dividend of about $1.54 a share a year and repurchased $667 million of stock in 2025. Earnings level. We measure what the business really earns for its owners as operating cash flow, with the swings in receivables and payables removed, less stock compensation and the capital spending needed to stay in business. On that basis owner earnings were about $435 million in 2016, $407 million in 2017, $626 million in 2018, $601 million in 2019 and $735 million in 2020. Then came the freight boom: $1,478 million in 2021 and $1,314 million in 2022, years in which freight rates tripled and cash first got trapped in receivables ($679 million absorbed in 2021) and then flooded back ($668 million released in 2022). We treat those two years as a one-off and leave them out. The three years since, $770 million (2023), $835 million (2024) and $824 million (2025), are tightly grouped and line up with reported net earnings of $753 million, $810 million and $812 million, so the earnings level is well supported. Our starting level is the middle of those three years, $824 million. Because the share count has fallen from 171 million in 2021 to about 131 million, we value the whole business and then divide by today's share count, so buybacks are not counted as growth. Trailing growth and year one. Owner earnings in 2025 were about 1% below 2024. The base case nonetheless assumes 2% growth in its first year, because the June 2026 quarterly report shows first-half 2026 owner earnings of roughly $485 million against $389 million a year earlier (net earnings $497 million versus $388 million), so 2026 will not fall below the starting level. We do not lift the starting level itself on two strong quarters, since part of the gain comes from tariff-driven customs complexity that can reverse. Base case, $96 a share. Owner earnings grow 2% a year for ten years, then stay flat for another fifteen. The 2% is below what the company has actually done: net earnings rose from $590 million in 2019 to $812 million in 2025 through the 2019 trade war, the pandemic and the 2023 freight normalization, and it did so with no acquisitions and no debt. The business is worth about $12.2 billion and owes nothing. We credit $500 million of the $1.03 billion of cash as excess, keeping the other half as working funds for a company that carries about $2 billion of receivables and payables, which gives roughly $12.7 billion, or about $96 across 131 million diluted shares. We left out share gains, a larger customs-brokerage business, demand from artificial-intelligence infrastructure customers and any lasting uplift from tariffs, because none is contracted or a repeated record. Bear case, $62 a share. A genuine trade recession of the size this company has already lived through: after the 2022 peak, owner earnings fell 41% and net earnings 45% within a year. We assume the tariff benefit fades and owner earnings slip to $700 million in the first year, fall to $495 million for two years, recover to $700 million by year five and then stay flat, with the story ending after twenty years. The business is worth about $7.6 billion, it owes nothing, and adding the $500 million of excess cash gives about $62. Even in this case it has no debt to refinance and cash flow stays far above any obligation. Operating lease commitments of about $571 million at the end of 2025 are already paid for inside cash flow and are not subtracted a second time. Bull case, $123 a share. The first-half 2026 pace holds, about $920 million a year (first-half actual plus second half at last year's level), and grows 4% a year for ten years, the rate net earnings have compounded since 2018, then stays flat for fifteen more years. The business is worth about $15.7 billion, owes nothing, and with the excess cash is about $123. What could prove this wrong. The largest uncertainty is the freight-rate spread and customs volume the company does not control. If the 2026 customs-brokerage surge turns out to be permanent, the bull case understates the business; if trade volumes drop for several years, the bear case is closer. We checked the starting level against reported net earnings and found no unexplained gap between cash flow and profit once the 2021-2022 working-capital swings are set aside. We could not read the quarterly report's narrative text, so the 2026 comments rest on its reported figures only. A note on the earlier estimate: our September 2026 figures were prepared on a different basis and are not comparable. No new annual or quarterly report has been filed since, so the business facts are unchanged. Margin-of-safety price, $55. We are fairly sure of the earnings level because three years of cash flow and profit agree and capital needs are small. The worst plausible event is a multi-year collapse in world trade, or a rule change that cuts customs fees. The business would survive it because it has no debt, a cash cushion and a cost base it can shrink, but earnings could fall by 40% or more for two years, which is the bear case. If we are wrong about the tariff-related uplift fading, or about earnings recovering after a downturn, the shares are worth about $62 or less. At $55 the bear case value of about $62 sits above the price, and the price assumes a holding period of about three years for the base-case value to show, with around $1.50 a share a year in dividends over that period. That is why the margin-of-safety price is $55 and not higher.