On Dec 30, Zacks Investment Research upgraded Eden Prairie, MN-based CH Robinson Worldwide Inc. (CHRW) to a Zacks Rank #2 (Buy).
Why the upgrade?
The company delivered better-than-expected earnings in the third quarter of 2014 on the back of improved revenues at the Transportation and Payment Services segments. This was the third earnings beat delivered by the company in the last four quarters. The average beat is 0.74%.
C.H. Robinson is considered to be among the first-in-class 3PL companies given its consistent growth rate over the past few years. The company will execute its go-to-market strategies with its current resources and expand its business through investments made in the last couple of years. We believe that the demand of 3PL services is rapidly growing as shippers seek cost-effective one-stop solutions for their freight forwarding requirements.
The company’s efforts to reward shareholders through dividends and share repurchases are also encouraging. In Dec 2014, the board of directors of the company approved an 8.6% hike in its quarterly cash dividend, raising the figure to 38 cents per share. The raised dividend will be paid on Dec 31, 2014 to shareholders of record at the close of business on Dec 15.
Moreover, we are positive on the company’s decision to acquire Internet-based freight brokering enterprise, Freightquote.com Inc., for $365 million in cash. The transaction will be financed through the company’s revolving credit facility and is expected to close in the first quarter of 2015, subject to regulatory approval.
The completion of the deal will help the company enhance its supply chain network across Kansas City. Over the last three years, C.H. Robinson has acquired two logistics service providers, namely, Phoenix International and Poland-based freight forwarder – Apreo Logistics S.A.
Annual earnings estimates for the company are also on an upswing with the Zacks Consensus Estimate for 2014 and 2015 climbing 14.34% and 12.52% respectively, on a year-over-year basis. In view of the strong fundamentals and the positive estimate revisions, we believe there is significant scope for stock price appreciation, going forward. Moreover, the long-term earnings (expected) growth rate of 11.38% is also encouraging.
Zacks Rank
Other stocks worth reckoning in the sector include Expeditors International of Washington Inc. (EXPD), Echo Global Logistics Inc. (ECHO) and Matson, Inc. (MATX). While Expeditors and Echo Global hold a Zacks Rank #2 (Buy), Matson sports a Zacks Rank #1 (Strong Buy).
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