Analysts' Choice: C.H. Robinson Steps On The Gas

8/31/2015


  Recent Price
$67
  Dividend
$1.52
  Yield
2.3%
  P/E Ratio
20
  Shares (millions)
146
  Long-Term Debt As % Of Capital
31%
  52-Week Price Range
$77.49 - $61.46

C.H. Robinson Worldwide ($67; CHRW) got its start in 1905 as a produce broker in North Dakota. The company still markets fresh produce, but this shrinking business accounted for just 11% of total revenue and 6% of net revenue in the six months ended June.

The rest of the company's revenue (and all of its growth over the last 10 quarters) came from transportation and logistics services. C.H. Robinson draws on a network of 66,000 firms to move clients' goods via truck, train, airplane, and ocean vessel. Last year, C.H. Robinson handled 14.3 million shipments through its 281 offices on four continents, generating 12% of its revenue outside the U.S. Despite its volume, C.H. Robinson has room to grow; it accounts for less than 2.5% of truck shipments and less than 2% of rail, ocean, and air shipments.

With a broad customer base (46,000, the largest accounting for just 1% of net revenue), C.H. Robinson stands ready to benefit from the U.S. economic recovery. North American truckload volumes rose 4% excluding acquisitions in the June quarter, and truckload rate per mile rose 3%. C.H. Robinson was initiated in the Aug. 24 issue as a Long-Term Buy.

Growth in high gear

Over the last year, C.H. Robinson's net revenue rose 13% and per-share profits 20%, while operating cash flow jumped 52% and free cash flow more than doubled. Such profit and cash-flow growth is unsustainable, but the consensus per-share-profit-growth targets of 13% this year and 9% next year leave room for positive surprises. Since C.H. Robinson announced better-than-expected earnings for the June quarter, the profit consensus has risen 4.5% for 2015 and 3.6% for 2016.

C.H. Robinson contracts with transport companies and then resells those services to its own customers. For that reason, the company prefers to measure its performance using net revenue, or total revenue minus the cost of purchased transportation, services, and produce. On a net basis, C.H. Robinson's revenue rose 12% annually over the last decade.

The company boosted its dividend 9% in December and 18% annually over the last 10 years. The dividend of $1.52 per share expected over the next year represents 46% of trailing 12-month profits and 35% of operating cash flow, leaving the company with plenty of flexibility for additional hikes. C.H. Robinson also deploys its cash to buy back stock, reducing the share count 1.6% over the last year and 3.5% annually over the last three.

C.H. Robinson has a history of growing through acquisitions, its most recent the January purchase of Freightquote.com for $398 million. More deals in coming months wouldn't surprise us.

Conclusion

Despite a rally after strong June-quarter results, the stock isn't expensive. At 20 times trailing earnings, C.H. Robinson trades roughly in line with its peer group (air freight & logistics) and 17% below its five-year average.

Obtain an annual report for C.H. Robinson Worldwide Inc. at 14701 Charlson Road, Eden Prairie, MN 55347, (952) 937-8500, www.chrobinson.com.

C.H. ROBINSON WORLDWIDE
Quarter
Per-Share Earnings*
($)
Net
Revenue
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Jun '15
0.94
vs.
0.80
12%
73.09
-
61.46
23 - 20
Mar '15
0.73
vs.
0.63
15%
76.18
-
67.11
25 - 22
Dec '14
0.77
vs.
0.62
13%
77.49
-
63.42
27 - 22
Sep '14
0.85
vs.
0.69
14%
69.50
-
63.09
25 - 23
           
Year
(Dec.)
Net
Revenue
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2014
2.01
3.05
1.43
77.49
-
50.21
25 - 16
2013
1.84
2.65
1.40
67.93
-
53.74
26 - 20
2012
1.72
3.67
1.34
71.76
-
50.81
20 - 14
2011
1.63
2.62
1.20
82.61
-
62.30
32 - 24
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
91
92
55
83
39
97
72

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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