C.H. Robinson Worldwide Inc. (CHRW) has reported second quarter 2011 earnings per share of 67 cents, which fell short of the Zacks Consensus Estimate by 2 cents. Earnings per share increased 13.6% from 59 cents in year-ago quarter primarily driven by pricing improvements. The year-over-year growth in the second quarter remained largely impacted by the increase in operating expenses.
Total revenue in the second quarter increased 10.3% year over year to $2,707.7 million, but narrowly missed the Zacks Consensus Estimate of $2,710.0 million.
Total operating expenses rose 14.2% year over year to $237.8 million in the second quarter primarily due to 16.1% and 8.8% increases in personnel as well as selling, general and administrative expenses, respectively.
Total operating ratio (operating expenses as a percentage of net revenue) improved approximately 20 basis points year over year to 56.9% in the reported quarter.
Segment Details
Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported a gross profit of $367.9 million, up 18.7% from the comparable year-ago period.
Gross profit from Truck (comprising truckload and less-than-truckload services) rose 20.9% to $314.3 million in the reported quarter, attributable to year-over-year volume growth and higher pricing.
Gross profit from Intermodal increased 15.2% year over year to $10.9 million attributable to higher shipments as well as prices on higher fuel costs.
Gross profit from Ocean also increased 13.3% to $16.4 million on higher pricing, partially offset by decline in volumes.
Air transportation gross profit inched up 1.5% year over year to $11.4 million driven by volume growth, mostly offset by volume declines.
Gross profit in Other logistics services registered a 0.5% year-over-year growth to $14.8 million.
Sourcing: The segment’s gross profit fell 14.4% year over year to $34.9 million in the reported quarter primarily as a result of depressed volumes .
Payment Services: The segment’s (comprising income from subsidiary, T-Chek Systems Inc.) gross profit climbed 8.1% year over year to $15.1 million in the second quarter largely driven by an increase in fees, which resulted from higher fuel prices and increased transaction.
Liquidity & Debt Position
C.H. Robinson ended the second quarter with cash and cash equivalents of $315.9 million as against $166.1 million in the comparable year-ago period.
Our Analysis
We believe gradual improvements in the economy has accelerated growth in the company’s freight transportation business as evident from strong shipments and pricing in Intermodal and Truck. Further, the cash-rich balance sheet with no debt and increasing shareholder returns makes the stock more attractive for long-term investment.
However, C.H. Robinson’s continued decline in the Sourcing segment has created significant volatility for the near-term financial performance of the company. Further, the company remains significantly challenged by higher operating cost followed by regulatory issues and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD).
Thus, we are currently maintaining our long-term Neutral recommendation on C.H. Robinson supported by the Zacks #3 (Hold) Rank.
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