A Mixed Bag for C.H. Robinson - Analyst Blog

C.H. Robinson Worldwide Inc. (CHRW), one of the largest networks of motor carrier capacity in North America reported fourth quarter earning per share of 62 cents, at par with Zacks Consensus Estimate.  Earning per share increased 19.2% year-over-year from 52 cents in year-ago quarter driven by strong business structure and accelerated revenue and volume growth.

For full-year 2010, earning per share grew 9.4% to $2.33 from $2.13 in 2009.

Total revenue in the fourth quarter increased 15.8% year over year to $2,325.3 million but missed the Zacks Consensus Estimate of $2,336.0 million. For fiscal 2010, total revenue shot up 22.4% to $9,274.3 million from $7,577.2 million in 2009.

Total operating expenses rose 14.1% year-over-year to $224.1 million in the fourth quarter primarily due to 17.7% and 4.5% increases in personnel as well as selling, general, and administrative expenses, respectively. For 2010, total operating expenses grew 6.0% year-over-year to $845.1 million.

Total operating ratio (operating expenses as a percentage of net revenue) declined 20 basis points to $57.7% in the reported quarter 2010.

Segment Details

Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $341.8 million, up 16.3% from fourth quarter 2009.

Gross profit from Truck (comprising truckload and less-than-truckload services) increased 16.2% to $290.5 million in the reported quarter, mainly due to year-over-year volume growth.

Gross profit from Intermodal increased 9.3% in the fourth quarter attributable to increased prices as a result of higher fuel costs, longer average length of haul, and price increases driven by a shortage of container capacity in markets.

Gross profit from Ocean and Air also increased 22.8%, and 16.1%, respectively, driven by volume growth. Other logistics services resulted in 17.5% higher gross profit primarily supported by an increase in management fees.

Sourcing: The segment's gross profit (including the Rosemont acquisition) dropped 4.2% year-over-year to $31.7 million in the reported quarter primarily as a result of depressed volumes with a large customer base.

Information Services: The segment's (comprising income from subsidiary, T-Chek Systems Inc.) gross profit climbed 20.9% year-over -year to $14.7 million in the fourth quarter largely driven by an increase in transactions and fees, which resulted from higher fuel prices.

Liquidity & Debt Position

C.H. Robinson ended the fourth quarter with cash and cash equivalents of $398.6 million against $337.3 million in the year-ago quarter. Long-term debt for the company stood at $22.0 million in 2010 compared with $22.5 million in 2009.

Dividend

On January 3, 2011, C.H. Robinson paid a quarterly dividend of 29 cents per share to shareholders of record on December 20, 2010.

 Our Analysis

We believe C.H. Robinson will continue to deliver better revenues in 2011. The company appears confident about its long-term growth target, which we believe is achievable primarily through internal growth.

However, demand and supply volatility due to past recessionary conditions, competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD), higher fuel costs, various government regulations and the company's inability to pass higher carrier costs to customers are causes for concern.  

Thus, we are currently maintaining our long-term Neutral recommendation on C.H. Robinson supported by the Zacks #3 Rank (Hold).

 
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