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C.H. Robinson Hurt by Multiple Headwinds: Time to Dump?
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Shares of C.H. Robinson Worldwide (CHRW - Free Report) have struggled this year, underperforming the industry it belongs to. The stock has been down 7.3% against its industry rally of 10% on a year-to-date basis.
Why the Decline?
Last month, the company reported lower-than-expected earnings per share in the second quarter 2017. Moreover, the bottom line decreased 22% year over year due to higher costs and lackluster performance of the truckload division.
Total operating expenses increased 8.7% year over year to $391.97 million, resulting in an operating ratio (operating expenses as a percentage of net revenue) of 68.3% compared with 60.7% in the year-ago quarter. High costs are likely to hurt the bottom line in the near-term as well.
In fact, the truckload segment performed miserably in the second quarter with segmental net revenues declining 14.3% year over year. Also revenues at the intermodal segment decreased 7.9% year over year as the presence of alternative lower cost trucks hurt Intermodal opportunities.
We remain concerned about the company’s high debt levels. The company exited the second quarter of 2017 with only $273.2 million of cash and $750 million of long-term debt compared with $500 million recorded at the end of 2016. Also, C.H. Robinson is liable to be hurt by adverse foreign exchange movements as it operates globally.
Certainly Not a Broker Favorite
Downward estimate revisions reflect pessimism in a stock’s prospects. The Zacks Consensus Estimate for current-quarter earnings has moved down 11% to 81 cents per share in the last two months due to multiple downward revisions. For full-year 2017, the same descended 9% in the identical period to $3.25 per share.
Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. In fact, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Additionally, the stock has an unattractive VGM Score of C. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.
In Conclusion
Taking into account the above-mentioned headwinds and the unfavorable readings, we advise investors to get rid of the stock at the moment. Currently, the company’s Zacks Rank #5 (Strong Sell) also suggests the same.
SkyWest has seen the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward over the last 60 days. The same at Ryanair climbed 5.6% over the same period.
Canadian National has seen the Zacks Consensus Estimate for current-year earnings being revised 6.3% upward over the last 60 days.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
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C.H. Robinson Hurt by Multiple Headwinds: Time to Dump?
Shares of C.H. Robinson Worldwide (CHRW - Free Report) have struggled this year, underperforming the industry it belongs to. The stock has been down 7.3% against its industry rally of 10% on a year-to-date basis.
Why the Decline?
Last month, the company reported lower-than-expected earnings per share in the second quarter 2017. Moreover, the bottom line decreased 22% year over year due to higher costs and lackluster performance of the truckload division.
Total operating expenses increased 8.7% year over year to $391.97 million, resulting in an operating ratio (operating expenses as a percentage of net revenue) of 68.3% compared with 60.7% in the year-ago quarter. High costs are likely to hurt the bottom line in the near-term as well.
In fact, the truckload segment performed miserably in the second quarter with segmental net revenues declining 14.3% year over year. Also revenues at the intermodal segment decreased 7.9% year over year as the presence of alternative lower cost trucks hurt Intermodal opportunities.
We remain concerned about the company’s high debt levels. The company exited the second quarter of 2017 with only $273.2 million of cash and $750 million of long-term debt compared with $500 million recorded at the end of 2016. Also, C.H. Robinson is liable to be hurt by adverse foreign exchange movements as it operates globally.
Certainly Not a Broker Favorite
Downward estimate revisions reflect pessimism in a stock’s prospects. The Zacks Consensus Estimate for current-quarter earnings has moved down 11% to 81 cents per share in the last two months due to multiple downward revisions. For full-year 2017, the same descended 9% in the identical period to $3.25 per share.
Given the wealth of information at the disposal of brokers, it is in the best interests of investors to be guided by broker advice and the direction of their estimate revisions. In fact, the direction of estimate revisions serves as an important pointer when it comes to the price of a stock.
Additionally, the stock has an unattractive VGM Score of C. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.
In Conclusion
Taking into account the above-mentioned headwinds and the unfavorable readings, we advise investors to get rid of the stock at the moment. Currently, the company’s Zacks Rank #5 (Strong Sell) also suggests the same.
Stocks to Consider
Meanwhile investors interested in the broader Transportation space can consider some better-ranked stocks from the same space like SkyWest Inc. (SKYW - Free Report) , Ryanair Holdings plc ((RYAAY - Free Report) ) and Canadian National Railway Company (CNI - Free Report) . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SkyWest has seen the Zacks Consensus Estimate for current-year earnings being revised 1.9% upward over the last 60 days. The same at Ryanair climbed 5.6% over the same period.
Canadian National has seen the Zacks Consensus Estimate for current-year earnings being revised 6.3% upward over the last 60 days.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>