C.H. Robinson Worldwide Inc. (CHRW), one of the largest networks of motor carrier capacity in North America reported first quarter 2011 earnings per share of 59 cents, missing the Zacks Consensus Estimate by a penny. Earning per share increased 18% from 50 cents in year-ago quarter primarily driven by pricing improvements and volume growth.
Total revenue in the first quarter increased 14% year over year to $2,365.5 million, surpassing the ZacksConsensus Estimate of $2,293.0 million.
Total operating expenses rose 18.8% year over year to $233.6 million in the first quarter primarily due to 19.3% and 17.4% increases in personnel as well as selling, general and administrative expenses, respectively.
Total operating ratio (operating expenses as a percentage of net revenue) grew approximately 80 basis points year over year to 59.9% in the reported quarter.
Segment Details
Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $349.9 million, up 20.3% from the comparable year-ago period.
Gross profit from Truck (comprising truckload and less-than-truckload services) rose 21.9% to $294.5 million in the reported quarter, attributable to year-over-year volume growth and higher pricing.
Gross profit from Intermodal increased 13.0% year over year to $9.6 million attributable to increased prices due to higher fuel costs. However, the price inflation was partially offset by a marginal decline in volume.
Gross profit from Ocean also increased 24.3% to $15.6 million on higher pricing and volume, which was partially offset by increased capacity cost.
Air transportation gross profit climbed 4.0% year over year to $9.2 million driven by volume growth.
Gross profit in Other logistics services registered a 4.8% year-over-year growth to $14.1 million supported by an increase in management fees.
Sourcing: The segment’s gross profit dropped 5.5% year over year to $33.0 million in the reported quarter primarily as a result of depressed volumes with a large customer base.
Information Services: The segment’s (comprising income from subsidiary, T-Chek Systems Inc.) gross profit climbed 13.3% year over year to $14.4 million in the first quarter largely driven by an increase in transactions and fees, which resulted from higher fuel prices.
Liquidity & Debt Position
C.H. Robinson ended the first quarter with cash and cash equivalents of $359.3 million as against $229.6 million in the comparable year-ago period.
Our Analysis
We believe C.H. Robinson is likely to benefit from growing Intermodal and International freight forwarding businesses. The company remains focused on expanding its network globally, through key investment plans. Additionally, the company remains well positioned to achieve its long-term growth target given its strong financial position. Further, the cash-rich balance sheet with no debt and increasing shareholder returns make it more attractive for long-term investment.
However, C.H. Robinson’s remains challenged by regulatory pressures from various government bodies, higher carriers’ cost, volatility in the truck market and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD).
Thus, we are currently maintaining our long-termNeutral recommendation on C.H. Robinson supported by the Zacks #3 (Hold) Rank.
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