C.H. Robinson Worldwide Inc. (CHRW) showed a $7.1 million improvement in profit to $102.6 million or 62 cents per share in the third quarter of 2010 from $94.5 million or 57 cents in the comparable quarter last year. The quarter’s earnings beat the Zacks Consensus Estimate by a penny.
Total revenue in the third quarter increased by $465.6 million to $2,420.4 million year over year but missed the Zacks Consensus Estimate by $67.6 million. The year-over-year improvement was mainly driven by higher volumes.
Total operating expenses jumped by $18.4 million to $216.2 million from $197.8 million in the year-ago quarter. The rise in expenses was primarily due to increases in personnel and selling, general and administrative expenses by 8.9% and 10.8%, respectively. Total operating margin (operating expenses as a percentage of total revenue) rose by 40 basis points to 56.5% from the prior-year quarter.
Segment Details
Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of$336.6 million, up 29.6% from third quarter 2009. This was the most profitable segment in the quarter.
Truck: The segment’s (comprising truckload and less-than-truckload services) gross profit increased 6% to $268.0 million mainly driven by a rise in volume from the year-ago quarter. Gross profit from Intermodal, Ocean and Air also increased by 10%, 27.3%, and 37.8%, respectively, on increased volumes. Other logistics services resulted in 25.2% higher gross profit primarily supported by an increase in management fees.
Sourcing: The segment’s gross profit (including the Rosemont acquisition) was $31.9 million, up 3.4% year over year as a result of a reduction in volumes.
Information Services: The segment’s gross profit climbed 18.7% to $14.1 million as compared to prior-year quarter largely driven by an increase in transactions and increase in fees, which resulted from higher fuel prices.
Liquidity & Debt Position
The company reported cash and cash equivalents of $249.4 million in the third quarter compared with $337.3 million at the end of fiscal 2009. Similarly, C.H. Robinson’s long-term debt was $22.0 million compared with $22.5 million at the end of fiscal 2009.
Our Analysis
We believe C.H. Robinson will show an improvement with economic recovery. A strong balance sheet with zero debt makes the stock more attractive. However, competitive threats, higher fuel costs, various government regulations and the company’s inability to pass higher carrier cost to customers keep us on the sidelines.
C.H. Robinson currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
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