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Can C.H. Robinson (CHRW) Deliver a Beat in Q1 Earnings?

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C.H. Robinson Worldwide, Inc. (CHRW - Free Report) is scheduled to report first-quarter 2018 earnings numbers on May 1, after the closing bell.

In the fourth quarter of 2017, the company delivered a positive earnings surprise of 16.5% with better-than-expected earnings and revenues. Moreover, the bottom line climbed 15.1% year over year on higher revenues. While the top line rose 16% year over year on increased pricing and volume growth across most the transportation sectors.

The company also boasts an impressive earnings history, surpassing the Zacks Consensus Estimate in three of the last four quarters with an average beat of 3.6%.

Let’s see, how things shape up for this earnings season.

Why a Likely Positive Surprise?

Our proven model shows that C.H. Robinson is likely to beat on earnings in the impending results on the back of a perfect combination of the following two key ingredients:

Zacks ESP: C.H. Robinson has an Earnings ESP of +0.17%. A positive Zacks ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: C.H. Robinson carries a Zacks Rank #3 (Hold), which further increases the predictive power of ESP. Notably, stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have significantly higher chances of beating estimates.

Conversely, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

 

What is Driving This Better-Than-Expected Earnings?

The transportation sector (comprising Truckload, Intermodal, Less-than-Truckload, Ocean, Air, Customs and Other logistics services) is likely to perform well in the first quarter on the back of increased pricing as well as volume growth. The Zacks Consensus Estimate for transportation revenues stands at $573 million, higher than $538 million a year ago.

We are also impressed by the company’s growth-by-acquisition strategy. For example, the company’s acquisition of Milgram & Company, completed last August, has strengthened its product portfolio. This is likely to boost results in the soon-to-be-reported quarter.

Additionally, the new tax law, having reduced the corporate tax rate significantly, is a further positive. The huge tax savings are likely to drive the company’s bottom line in the to-be-reported quarter.

However, high operating expenses might hurt the company’s first-quarter results like the previous report. This in turn could lead to a deterioration of the operating ratio (defined as operating expenses as a percentage of revenues).

Other Stocks to Consider

Investors interested in the broader Transportation sector may also consider LATAM Airlines Group S.A. (LTM - Free Report) , Expeditors International of Washington, Inc. (EXPD - Free Report) and Copa Holdings, S.A. (CPA - Free Report) as these stocks too possess the right combination of elements to deliver an earnings beat this reporting cycle.

LATAM Airlines has an Earnings ESP of +19.23% and a Zacks Rank of 3. The company will announce first-quarter results on May 8.

Expeditors is a #2 Ranked player and has an Earnings ESP of +2.09%. The company will report first-quarter earnings figures on May 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Copa Holdings has an Earnings ESP of +0.78% and is a Zacks #3 Ranked player. The company will report first-quarter earnings on May 9.

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