On May 27, 2015, we issued an updated research report on third-party logistics company, CH Robinson Worldwide Inc. CHRW.
The Eden Prairie, MN-based company disappointed investors with its first-quarter 2015 results missing the Zacks Consensus Estimate of both earnings and revenues. The company reported first-quarter earnings per share of 73 cents, missing the consensus estimate by a penny. Total revenue of $3,300.9 million also fell short of the Zacks Consensus Estimate by 3.56%.
Following the dismal first quarter results, earnings estimates for this Zacks Rank #4 (Sell) stock have been on the downswing. Over the last 60 days, the 2015 Zacks Consensus Estimate of earnings has gone down 11 cents to $3.33 per share on the back of downward revisions by 15 analysts. Likewise, the estimate for 2016 has moved south by 12 cents over the same time frame to $3.68 per share, with 14 analysts slashing their respective earnings estimate for the period.
We note that a competitive freight market and a declining truckload market share will continue to adversely impact the company, going forward. Increasing cost of transportation is another challenge even as CH Robinson struggles to pass on the higher transportation costs to customers. To add to that, adverse foreign currency movement, courtesy a strong dollar, is another hurdle facing the company. A weak balance sheet further poses concern. We also expect a rise in employee count, increased incentive compensation and investment in network infrastructure to weigh on margins in the near future.
In view of the above negatives, we believe there is significant possibility of stock price depreciation at CH Robinson in the near term. Consequently, we advise investors to avoid the stock for the time being.
Key Picks in the Sector
Not all stocks are performing as badly as CH Robinson. Some better-ranked players in the transportation sector are Matson, Inc. MATX, Echo Global Logistics, Inc. ECHO and Expeditors International of Washington Inc. EXPD. Echo Global Logistics and Expeditors International carry a Zacks Rank#2 (Buy) while Matson sports a Zacks Rank#1 (Strong Buy).
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