It has been about a month since the last earnings report for C.H. Robinson Worldwide (CHRW - Free Report) . Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is C.H. Robinson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Miss at C.H. Robinson in Q3
C.H. Robinson's third-quarter 2019 earnings of $1.07 per share missed the Zacks Consensus Estimate of $1.16. The bottom line also declined 14.4% year over year. Results were hurt by truckload margin compression in North America.
Total revenues came in at $3,856.1 million, falling short of the Zacks Consensus Estimate of $3,925.1 million. Moreover, the top line fell 10.2% year over year. This downturn can be attributed to unfavorable pricing across most transportation service lines.
Total operating expenses decreased 3.5% year over year to $432.35 million, primarily due to 4.4% decline in Personnel expenses. However, operating ratio (operating expenses as a percentage of net revenues) deteriorated to 68.3% from 64.6% in the year-ago quarter. Notably, lower the value of the metric the better.
The company returned $135.9 million to its shareholders through a combination of cash dividends ($68.9 million) and share repurchases ($67 million). Capital expenditures totaled $19.4 million in the quarter under review.
At North American Surface Transportation (NAST), total revenues were $2.83 billion (down 12.4%) in the third quarter. This downside was due to weak pricing. Net revenues at the segment also dropped 13.2%. NAST results include those of Robinson Fresh transportation, which were previously reported under a separate segment.
Total revenues at Global Forwarding summed $597.69 million, down 6.5%. Low pricing in ocean and air as well as contracted air volumes affected results. However, net revenues at the segment inched up 1.3%. The Space Cargo Group acquisition boosted results by 3.5 percentage points.
A historical presentation of the results on an enterprise basis is given below:
Transportation: The unit (comprising Truckload, Intermodal, Less-than-Truckload, Ocean, Air, Customs and Other logistics services) delivered net revenues of $608.37 million in the quarter under consideration, down 9% from the prior-year figure.
Truckload net revenues declined 16% year over year to $317.99 million with volumes contracting 4%. However, net revenues at Less-than-Truckload inched up 1.6% year over year to $124.52 million. LTL volumes also grew 4% in the quarter.
At the Intermodal segment, net revenues declined 15% year over year to $7.11 million as volumes fell 24%.
Net revenues at the Ocean transportation segment increased 4.1% year over year to $77.88 million. But the same at the Air transportation division dropped 9.6% year over year to $27.12 million. Meanwhile, customs net revenues rose 1.8% to $23.72 million.
Other logistics services’ net revenues dipped 3.7% year over year to $30.03 million.
Sourcing: Net revenues at the segment slipped to $25.06 million.
The company exited the third quarter with cash and cash equivalents of $384.42 million compared with $378.62 million at the end of 2018. Long-term debt was $1.25 billion compared with $1.34 billion at 2018 end.
C.H. Robinson now anticipates capital expenditures between $65 and $75 million for 2019 with the majority to be spent on technology. Previously, capital expenditures were expected to be $80-$90 million for the current year. Additionally, effective tax rate is estimated in the 23-24% band compared with 24-25% expected earlier. Amid the sluggish freight environment, the company expects an oversupply of capacity over the next few quarters in comparison to the available shipments.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -13.64% due to these changes.
At this time, C.H. Robinson has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise C.H. Robinson has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.