C.H. Robinson Worldwide, Inc. (CHRW - Analyst Report) has announced an increase in its share repurchase program by up to 10 million shares. This represents approximately 6.2% of the company’s outstanding shares as of August 10. The company is currently authorized to buy back 2.5 million shares under a program approved in 2009.
Apart from increasing share buyback, the company also declared a quarterly dividend of 33 cents to shareholders of record on September 7, payable on October 1. The company has continuously paid out dividends to shareholders for over twenty-five years. In December 2011, C.H. Robinson boosted its annual dividend to $1.32 per share for this year from $1.16 per share paid in 2011.
C.H. Robinson continues to strengthen its balance sheet with no debt and excess liquidity. The company has generated substantial cash from operations over the past several years. This has been utilized in numerous investment activities such as internal growth, acquisitions, share repurchases or dividend increases.
Apart from investor returns, the company also focuses on increased investments on rail infrastructure. During the second quarter, the company raised its estimated capital expenditures for fiscal 2012 to $46-$51 million from $40-$45 million, given the increased investment in technology and infrastructural developments.
We believe that the company’s increased investor return and capital expenditure stems from its continued growth despite uncertainties surrounding the truck market. Being a third party logistic company, C.H. Robinson’s asset-light model provides greater earnings flexibility during an economic downturn.
In addition, its multi-modal solutions remain advantageous in the current freight market by providing a one-stop solution for shippers, hence leading to reduced overall shipping cost. Additionally, the company’s diversified transport solutions help it significantly despite a volatile truck market that constitutes a significant revenue contributor.
However, C.H. Robinson remains challenged by rising third party carrier cost. Given capacity issues, independent truck owners are expected to further increase prices that could, in turn, compress margins. Further, regulatory issues and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD - Analyst Report) also pose significant threats to the company’s profitability.
We are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short term, the company holds a Zacks #4 Rank (Sell).