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Here's Why Investors Should Avoid C.H. Robinson Stock Now
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Shares of C.H. Robinson Worldwide (CHRW - Free Report) have had a tough run on the bourses lately. In the past three months, shares of this Minnesota-based freight broker have declined 9% against its industry’s 8.8% growth.
Let’s delve deep to unearth the factors hurting C.H. Robinson’s performance.
Unfavorable pricing across most service lines due to excess capacity and lackluster demand is hurting the company’s growth. Evidently, revenues declined 7.8% in the first nine months of 2019 due to volume softness. The sluggish freight environment due to the trade-related uncertainty is a huge downside for C.H. Robinson and is affecting its volumes.
In the global forwarding market, the company is witnessing air and ocean volume declines due to soft demand as a result of slowdown in global trade. Amid the weak freight demand, excess truck capacity is weighing on the company’s truckload volumes. With truck pricing expected to be nearly flat in fourth-quarter 2019 and first-quarter 2020, the company anticipates net revenue per shipment to decline year over year through the first half of 2020.
Despite struggling due to the downbeat freight scenario, the company is focused on making investments in technology. Although aimed at long-term growth prospects, the large capital expenses might weigh on C.H. Robinson’s bottom line. This is especially concerning for the company as it is already battling weak earnings due to soft volumes. For 2019, the company anticipates capital expenditures between $65 and $75 million, with the majority to be spent on technology. Its decision to invest $1 billion in technology over the next five years will increase capex further.
Moreover, the frequent management changes at C.H. Robinson do not bode well as far as investors’ confidence in the stock is concerned. In February 2019, C.H. Robinson promoted its current chief operating officer, Robert Biesterfeld, to the position of chief executive officer. Also, Andrew Clarke quit as chief financial officer earlier this year. Mike Zechmeister has replaced him as the new chief financial officer.
Estimate Revisions & Zacks Rank
Downward estimate revisions highlight the pessimism surrounding the C.H. Robinson stock. For 2019 and 2020 earnings, the Zacks Consensus Estimate has been revised 6.9% and 10.9% downward, respectively, over the past 60 days.
Given this bleak backdrop, C.H. Robinson’s Zacks Rank #5 (Strong Sell) is well justified. Consequently, we believe investors should discard this stock from their portfolios at the moment.
Shares of United Airlines, GATX and Kansas City Southern have rallied more than 9%, 16% and 59%, respectively, so far this year.
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This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
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Here's Why Investors Should Avoid C.H. Robinson Stock Now
Shares of C.H. Robinson Worldwide (CHRW - Free Report) have had a tough run on the bourses lately. In the past three months, shares of this Minnesota-based freight broker have declined 9% against its industry’s 8.8% growth.
Let’s delve deep to unearth the factors hurting C.H. Robinson’s performance.
Unfavorable pricing across most service lines due to excess capacity and lackluster demand is hurting the company’s growth. Evidently, revenues declined 7.8% in the first nine months of 2019 due to volume softness. The sluggish freight environment due to the trade-related uncertainty is a huge downside for C.H. Robinson and is affecting its volumes.
In the global forwarding market, the company is witnessing air and ocean volume declines due to soft demand as a result of slowdown in global trade. Amid the weak freight demand, excess truck capacity is weighing on the company’s truckload volumes. With truck pricing expected to be nearly flat in fourth-quarter 2019 and first-quarter 2020, the company anticipates net revenue per shipment to decline year over year through the first half of 2020.
Despite struggling due to the downbeat freight scenario, the company is focused on making investments in technology. Although aimed at long-term growth prospects, the large capital expenses might weigh on C.H. Robinson’s bottom line. This is especially concerning for the company as it is already battling weak earnings due to soft volumes. For 2019, the company anticipates capital expenditures between $65 and $75 million, with the majority to be spent on technology. Its decision to invest $1 billion in technology over the next five years will increase capex further.
Moreover, the frequent management changes at C.H. Robinson do not bode well as far as investors’ confidence in the stock is concerned. In February 2019, C.H. Robinson promoted its current chief operating officer, Robert Biesterfeld, to the position of chief executive officer. Also, Andrew Clarke quit as chief financial officer earlier this year. Mike Zechmeister has replaced him as the new chief financial officer.
Estimate Revisions & Zacks Rank
Downward estimate revisions highlight the pessimism surrounding the C.H. Robinson stock. For 2019 and 2020 earnings, the Zacks Consensus Estimate has been revised 6.9% and 10.9% downward, respectively, over the past 60 days.
Given this bleak backdrop, C.H. Robinson’s Zacks Rank #5 (Strong Sell) is well justified. Consequently, we believe investors should discard this stock from their portfolios at the moment.
Stocks to Consider
Investors interested in the Zacks Transportation sector include United Airlines Holdings (UAL - Free Report) , GATX Corporation (GATX - Free Report) and Kansas City Southern , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of United Airlines, GATX and Kansas City Southern have rallied more than 9%, 16% and 59%, respectively, so far this year.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
See their latest picks free >>