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C.H. Robinson Worldwide Inc. (CHRW - Analyst Report) has reported second quarter 2012 earnings per share of 71 cents, in line with the Zacks Consensus Estimate. Reported earnings also increased 6% from 67 cents in the year-ago quarter.

Total revenue in the second quarter escalated 9.2% year over year to $2.96 billion, surpassing the Zacks Consensus Estimate of $2.92 billion.

Total operating expenses increased 1.2% year over year to $240.6 million, primarily due to 10.9% rise in purchased transportation and related services expenses.

Total operating ratio (operating expenses as a percentage of net revenue) was 56.5% in the reported quarter, reflecting an improvement of 40 basis points (bps) from 56.9% in the year-ago quarter.

Segment Details

Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $369 million in the second quarter, up 0.3% from the year-ago period.

Gross profit from Truck (comprising truckload and less-than-truckload services) declined 0.5% to $312.6 million due to higher transportation cost.

Gross profit from Intermodal fell 7.8% year over year to $10 million due to declines in net revenue margin that clouded volume growth. Net revenue margins were affected by higher capacity cost and change in business mix. The company purchased 500 containers and expects delivery by the third quarter, replacing 350 leased containers.

Gross profit from Ocean grew 3.4% year over year to $17 million based on higher pricing, offsetting volume decline.

Air transportation gross profit plunged 7.5% year over year to $10.6 million, primarily due to lower pricing that offset volume growth.

Gross profit from Other logistics services registered 26.7% year-over-year growth to $18.8 million on better transportation management and higher customs net revenues.

Sourcing: The segment’s gross profit increased 15.1% year over year to $40.2 million primarily on higher volumes and increased net revenue margin due to commodity and service mix. Additionally, the acquisition of Timco Worldwide last year also aided the segment’s growth.

Payment Services: The segment’s gross profit (comprising income from subsidiary, T-Chek Systems Inc.) climbed 8.1% year over year to $16.3 million in the second quarter, driven by an increase in transactions.   

Liquidity & Debt Position

C.H. Robinson ended the quarter with cash and cash equivalents of $240.6 million as against $315.9 million in the year-ago period and had no debt on its balance sheet. Cash from operation rose to $110 million at the end of the quarter from $78.9 million in the year-ago period.

Our Analysis

We believe the company remains well positioned to benefit from its freight transportation business as evident by strong shipments and pricing in Intermodal and less than truckload market. Further, the cash-rich balance sheet with no debt and increasing shareholder returns make it more attractive for long-term investment. However, the company remains significantly challenged by higher transportation costs followed by regulatory issues and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD - Analyst Report).

Thus, we are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short term, the company holds a Zacks #3 Rank (Hold).

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