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Bear of the Day: C.H. Robinson Worldwide (CHRW)

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C.H. Robinson Worldwide (CHRW - Free Report) is one of the largest logistics platforms on the planet, and CHRW stock has outperformed the market over the last year.

But C.H. Robinson reported disappointing Q3 2022 results in early November. The company’s earnings outlook has slipped since then and CHRW shares have now lagged the market over the past three months.

The Basics

C.H. Robinson is one of the world's largest logistics platforms, with nearly $30 billion in freight under management. The company provides freight transportation and logistics, as well as outsource solutions, information services, and beyond to roughly 100,000 global customers.

In general, the third-party logistics industry offers room for expansion in a globally-interconnected world, where streamlined shipping and transportation services are paramount. C.H. Robinson’s revenue climbed 6% in 2020 and 43% in 2021.

Recent Setbacks

The firm was looking solid through the first half of 2022, but the slowing economy is finally catching up. “On our second quarter earnings call in late July, I talked about a deceleration in demand that we expected to see in the second half of 2022 in three large verticals for freight, including weakness in the retail market and further slowing in the housing market. We’re now seeing those expectations play out,” CEO Bob Biesterfeld said in prepared Q3 remarks in early November.  

C.H. Robinson’s third quarter revenue fell 4% as did its adjusted earnings. Both figures came in below Zacks estimates, with the logistics firm missing our EPS estimate by 17%. The company’s operating expenses climbed 12%. Plus, CHRW said it believes it is “entering a time of slower economic growth where freight markets will continue to cool from their peak.”

Zacks Investment Research
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Zacks estimates still call for its revenue to climb nearly 11% in 2022 to boost its adjusted earnings by 29%. These are rather impressive figures considering the big year it had in 2021. However, C.H. Robinson now faces economic headwinds and two strong years of growth to compare itself against.

Analysts lowered their earnings outlook for both 2022 and 2023 to help it land a Zacks Rank #5 (Strong Sell) right now. Zacks estimates call for its revenue to fall 14% YoY in 2023 and for its adjusted earnings to slide 28% to see it pull in less on both the top and bottom lines than it did in 2021.

Bottom Line

C.H. Robinson does pay a solid dividend and it is rolling out efforts to cut costs. That said, investors might want to stay away from CHRW shares until the market gains more clarity on the economic outlook for 2023.

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