To own a stock that is a darling of the Wall Street crowd is to dance with the devil. It's a great experience while things are good, but if there's a stumble you realize just how quickly those investors will find another dance partner. That might be an exaggeration of what has been happening to global logistics company UTi Worldwide
At least the top-line growth isn't really slowing too terribly much. Reported revenue (both gross and net) jumped 23% as reported this quarter, with the underlying growth (sans foreign currency and acquisitions) in the mid-teens. Growth was a bit mixed across the board: High fuel costs are putting the pinch on the air freight business, but the ocean freight business is doing much better.
The bigger issue, though, is profitability. The company is investing in both a new IT platform and new marketing, both of which have upfront costs that have to be paid ahead of the eventual positive contributions of the moves. Consequently, operating income was only slightly higher than the year-ago level, and operating margin compressed by a couple of points.
You might think these problems have nothing to do with competitors like Expeditors International
So, what do you and I do with the stock? Well, for starters, this is a high-quality company (you don't snag business from Wal-Mart
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Fool contributor Stephen Simpson but has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).