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

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C.H. Robinson Worldwide, Inc. (CHRW - Free Report) stock tumbled roughly 15% after it posted worse-than-projected quarterly results on October 29. The third-party logistics powerhouse’s outlook appears to be headed in the wrong direction amid a global economic slowdown.

What’s Wrong?

C.H. Robinson is a third-party logistics firm that provides everything from freight transportation and logistics to outsource solutions and more from North America to Asia. The company has recently fallen victim to a broader economic slowdown. C.H. Robinson, like economic bellwether Caterpillar (CAT - Free Report) , has been hurt by the fact that businesses have started to hold off on big purchases and other growth initiatives amid macroeconomic uncertainty, made worse by the U.S.-China trade war.

CHRW’s Q3 revenue fell 8.7% (the fourth straight period it failed to top our revenue estimates), while income from operations tumbled 18.2%. Meanwhile, the company’s adjusted quarterly earnings fell over 14% to $1.07 per share to come in well short of our $1.16 a share Zacks Consensus Estimate. Year-to-date, company revenues are down 7.8 percent, driven by declines across transportations units.

C.H. Robinson CEO Bob Biesterfeld summed up the company’s current situation and how the worldwide economic picture is set to impact his company in prepared third-quarter remarks.

“We anticipated an aggressive industry pricing environment coming into the second half of this year driven by excess capacity and softening demand and knew we faced difficult comparisons versus our strong double-digit net revenue growth in the second half of last year. Our results were negatively impacted by truckload margin compression in North America,” Biesterfeld said.

“Looking ahead, we expect that North American routing guides will continue to reset at lower prices in response to the falling cost environment and decline in spot market freight opportunities. While industry data suggests capacity continues to exit the North America truckload market, we believe capacity will exceed available shipments for the next few quarters.”

 

 

 

 

 

 

Other Fundamentals

CHRW stock is down over 13% in the past 12 months and its shares tumbled from $90.52 to $77.08 per share in one day after it posted its third quarter results. Investors will also notice just how quickly and dramatically C.H. Robinson’s longer-term earnings picture has turned in the wrong direction. The company is also part of our Transportation – Services industry that sits in the bottom 27% of our 252 different Zacks industries at the moment.

On the positive side, the Minneapolis, Minnesota-based firm currently pays an annualized dividend of $2.00 per share, for a solid 2.53% yield. CHRW is also trading at a discount against its industry at 17.8X forward earnings estimates compared to 18.2X, while XPO Logistics (XPO - Free Report) comes in at 21.2X.

Q4 Outlook & Earnings Trends

C.H. Robinson’s fourth quarter revenues are projected to slip 7.2% to $3.84 billion, based on our Zacks Consensus Estimates at the moment. Overall, the company’s full-year fiscal 2019 sales are projected to fall 7.7% to $15.36 billion.

The logistics firm’s Q1 fiscal 2020 sales are then projected to dip nearly 3%. CHRW’s full-year fiscal 2020 revenue is actually expected to pop almost 2% above our current-year estimate, but this would still come in far below the company’s 2018 results.

At the bottom end of the income statement, CHRW’s adjusted Q4 earnings are projected to plummet 24.6% from the year-ago period, with full-year FY19 set to slip more than 6%. C.H. Robinson’s first quarter fiscal 2020 earnings are projected to fall 14.7%, which is expected to help drag down its full-year FY20 EPS figure by 1%.

The chart below also helps investors see just how rough the company’s earnings estimate revision picture has turned recently.

 

 

 

 

Bottom Line

Clearly, many of C.H. Robinson Worldwide’s current problems are outside of its control. But there are no moral victories on Wall Street and investors should remember that the International Monetary Fund in October announced that it expects the global economy to grow at its slowest pace since 2009 this year.

C.H. Robinson Worldwide is a Zacks Rank #5 (Strong Sell) at the moment that also sports an “F” grade for Momentum in our Style Scores system. Investors still interested in the broader Transportation - Services space might instead consider #2 (Buy)-ranked I.D. Systems, Inc. (PWFL - Free Report) .

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