Back to top

Analyst Blog

One of the leading third party logistic companies, C.H. Robinson Worldwide, Inc. (CHRW - Analyst Report) recently announced to acquire Polish freight carrier Apreo Logistics S.A. The deal terms remain undisclosed.

Apreo specializes in truckload offerings that involve dry van and temperature controlled freight transportation. In addition, the company has warehouse facilities and deals in ocean and air freight forwarding.  

C.H. Robinson is expected to benefit from Apreo’s gross annual revenues of more than $100 million and a market base comprising 2000 customers. Apreo is also expected to add infrastructural capabilities with 21 offices across Poland and a work force of 300 employees.

C.H. Robinson did not specify any timeline for closing the acquisition but stated that the deal is subject to regulatory approvals from the Polish Office for Competition and Consumer Protection.

Despite the looming economic backdrop and a slow down in the freight demand, C.H. Robinson remains keen on expanding its footprint via acquisitions.

Although the near-term outcomes are too early to project, we foresee long-term synergies arising from these acquisitions. Given the on-going Eurozone crisis and dwindling financials of small European companies, industry big wigs like C.H. Robinson are leveraging the opportunity of penetrating into a potential market of Europe.

Since poor market conditions are weighing on the market value of these companies, the acquisition cost remains comparatively lower. Further, the European freight market remains highly fragmented and mainly constitute small operators that cater to localized regions. This makes them all the more susceptible to acquisition by larger peers.

However, a large carrier like C.H. Robinson with substantial financial and infrastructural facilities would like to seize the opportunity of integrating its operations through various acquisitions in Europe. The strategy can be well demonstrated by the emerging expansion trend in the parcel delivery industry.

Companies like FedEx Corporation (FDX - Analyst Report) and United Parcel Service, Inc. (UPS - Analyst Report), pursued expansions plans through multiple European acquisitions. While, FedEx acquired Opek Sp. z o.o., a Polish courier company and TATEX, a French B2B Express transportation company. United Parcel Service bought Kiala, a European consumer delivery company and is also on the verge of completing the acquisition of Dutch shipping company TNT Express.  

However, over the near term, heavy capital expenditures involved in funding acquisitions can lead to financial distress.  The company may finance its acquisitions either with available cash, issuing equity or raising debt. In such an event, the key concern would either be the liquidity position of the company or the margins, which may be weighed down by the rising interest burden due to loans.

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

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%