Analysts' Choice: C.H. Robinson Still On The Move

3/14/2016


  Recent Price
$71
  Dividend
$1.72
  Yield
2.4%
  P/E Ratio
20
  Shares (millions)
144
  Long-Term Debt As % Of Capital
31%
  52-Week Price Range
$76.18 - $59.71

From a distance, the transportation business looks simple — load goods into a truck or train, then unload them at the destination. Of course, it's not that simple. C.H. Robinson Worldwide ($71; CHRW) provides the services that make the business seem so deceptively straightforward.

Demand softened in the second half of last year, though the company sees rising demand for integrated, global services. Last year, the company's per-share profits rose 15%, with operating cash flow up 40%. Total revenue was flat, but net revenue, which excludes the cost of purchased transportation and represents a better gauge of C.H. Robinson's true growth, increased a solid 13%.

We first recommended the 110-year-old company in the Aug. 24, 2015, issue of the Forecasts. Since the stock joined our buy lists, it has returned 5%, versus an average decline of 3% for industrial stocks in the S&P 1500 Index. C.H. Robinson is a Focus List Buy and a Long-Term Buy.

Transportation hub

C.H. Robinson's reach extends as wide as the world's transportation system. The company serves more than 110,000 customers, 25% in manufacturing and 20% in the food and beverage business, with the bulk of the rest shipping chemicals, retail goods, automobiles, and paper.

The company managed 17 million shipments in 2015, up 14% from a year earlier, while net revenue margin rose to 17.9% from 15.9% in 2014, reaching its highest level since 2009. Credit lower fuel costs and faster growth in more-profitable short-haul shipping for the wider margins. The transportation business (95% of net revenue in 2015) consists of five units:

• Truckload (58% of total net revenue) volumes rose 6% last year, with pricing up 1% on a per-mile basis excluding the estimated effect of the change in fuel prices.

• The less-than-truckload business (16%) grew revenue 39% and volume 32%. The acquisition of FreightQuote accounted for much of that growth, but not all of it.

• A global forwarding unit (15%) deals with ocean and air shipping, as well as customs brokerage. Volumes rose enough to offset soft pricing.

• C.H. Robinson also operates a small intermodal business (2%) that deals with railroad shipping.

• Other logistics services, such as transportation management and warehousing, generated 4% of net revenue.

The remaining 5% of net revenue comes from the fresh-produce business, which grew 5% for the year.

Like all businesses, C.H. Robinson has issues to address, most notably whether it can maintain pricing power if demand continues to soften. Prices fell across the board in the fourth quarter. In our view, analyst growth estimates (per-share profits up 8% this year and 7% next year) discount pricing pressures and may prove conservative.

Last year, the company spent $236 million on dividends and $232 million on share buybacks. The capital distributions accounted for 92% of net income, roughly in line with its goal to share 90% of income with shareholders. You can 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*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Dec '15
0.88
vs.
0.77
-4%
73.34
-
59.71
22 - 18
Sep '15
0.96
vs.
0.85
-1%
71.50
-
61.64
22 - 19
Jun '15
0.94
vs.
0.80
1%
73.09
-
61.46
23 - 20
Mar '15
0.73
vs.
0.63
5%
76.18
-
67.11
25 - 22
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2015
13.48
3.51
1.57
76.18
-
59.71
22 - 17
2014
13.47
3.05
1.43
77.49
-
50.21
25 - 16
2013
12.75
2.65
1.40
67.93
-
53.74
26 - 20
2012
11.36
3.67
1.67
71.76
-
50.81
20 - 14
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
87
80
50
83
44
93
86

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


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