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C.H. Robinson Q3 Earnings Fall Short

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C.H. Robinson Worldwide Inc. (CHRW - Free Report) reported third quarter 2013 adjusted earnings per share of 69 cents, which fell short of the Zacks Consensus Estimate by four cents. Adjusted earnings fell 4.2% from 72 cents in the year-ago quarter.

Total revenue in the third quarter escalated 15.1% year over year to $3.32 billion, surpassing the Zacks Consensus Estimate of $3.27 billion.

Total operating expenses increased 16.9% year over year to $287 million in the third quarter, resulting in an operating ratio (operating expenses as a percentage of net revenue) of 61.9%, up from 56.7%.

Segment Details

TransportationThe segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $429.98 million in the third quarter, up 12.3% from the year-ago quarter.

Gross profit from Truck (comprising truckload and less-than-truckload services) dipped 1.3% to $265.5 million.

Gross profit from LTL increased 4.4% year over year to $61.4 million. 

Gross profit from Intermodal rose 1.3% year over year to $10.2 million.  

Gross profit from Ocean soared 168.6% to $49.7 million aided by the Phoenix operations acquired in Nov 2012.

Air transportation gross profit grew 100.5% year over year to $18.1 million primarily attributable to decreased cost of capacity and increased pricing and the Phoenix acquisition.

Gross profit from Customs increased 117.4% year over year to $8.9 million. 

Gross profit from other logistics services registered 22.8% year-over-year growth to $16.1 million on the back of higher transaction fees and synergies from acquisitions.

SourcingThe segment’s gross profit decreased 9.5% year over year to $30.6 million.

Payment ServicesThe segment’s (comprising income from subsidiary, T-Chek Systems Inc.) gross profit plunged 82.8% year over year to $2.8 million due to a divesture in T-Chek system.

Liquidity & Debt Position

C.H. Robinson ended the quarter with cash and cash equivalents of $129.7 million as against $210 million at the end of 2012. The company had $500 million in long-term on its balance sheet compared to no debt in 2012. Cash from operations decreased to $182.93 million at the end of quarter from $267.16 million a year ago.

Our Analysis

We believe C.H. Robinson’s asset light model with diversified freight forwarding solutions provide earnings flexibility in an economic downturn. The company’s near-term growth is expected to be driven by synergies arising from its acquisitions, expansion of U.S. truckload brokerage, penetration in the less-than-truckload and intermodal markets, expansion of Transportation Management Center offerings and international freight forwarding. However, factors like competitive freight market, declining truckload market share and limited margin expansion opportunities could restrict near-term growth. 

C.H. Robinson, which operates with other freight carriers like Expeditors International of Washington Inc. (EXPD - Free Report) , Matson, Inc. (MATX - Free Report) and FedEx Corporation (FDX - Free Report) , has a Zacks Rank #4 (Sell).

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