EXPD Expeditors International of Washington Inc

C.H. Robinson Worldwide Inc. (CHRW) has reported fourth quarter 2011 earnings per share of 67 cents, missing the Zacks Consensus Estimate by a penny.  Reported earnings  increased 8.1% from 62 cents in the year-ago quarter, primarily driven by Intermodal and trucking revenues. For fiscal 2011, earnings per share climbed 12.4% year over year to $2.62.

Total revenue in the fourth quarter escalated 10.4% year over year to $2.57 billion, but lagged the Zacks Consensus Estimate of $2.62 billion. Total revenue in the full year upped 11.5% year over year to $10.3 billion. 

Total operating expenses rose 2.4% year over year to $229.4 million in the fourth quarter, primarily due to 3.1% and 19.2% upside in personnel and selling, general and administrative expenses, respectively. Total operating expenses for the year increased 11.2% year over year to $692.7 million. 

Total operating ratio (operating expenses as a percentage of net revenue) was 57.2% in the reported quarter, an improvement of 50 basis points (bps) from 57.7% in the year-ago quarter. Total operating ratio in fiscal 2011 was 57.5%, up 10 bps from 57.6% a year ago.

Segment Details

Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $401.4 million in the fourth quarter, up 3.4% from the year-ago period.

Gross profit from Truck (comprising truckload and less-than-truckload services) increased 5.5% to $306.4 million in the reported quarter, attributable to more shipments. Further the tightening of the truck market has also aid pricing moving upward

Gross profit from Intermodal increased 7.9% year over year to $10.2 million on higher shipments, as well as prices and fuel surcharges.

Gross profit from Ocean also inched up 1.8% to $17 million based on higher loads, offsetting price declines.

Air transportation gross profit plunged 18.1% year over year to $8.8 million primarily due to lower volume, pricing and margin.

Gross profit from Other logistics services registered a 12.6% year-over-year growth to $16.2 million.

Sourcing: The segment’s gross profit decreased 13.5% year over year to $27.4 million primarily due to a decline in net revenue margin that remained an overhang on volume growth.

Payment Services: The segment’s (comprising income from subsidiary, T-Chek Systems Inc.) gross profit climbed 4.1% year over year to $15.2 million in the fourth quarter, driven by an increase in fees, arising from higher fuel prices and transaction alongside changes in commercial contracts.

Liquidity & Debt Position

C.H. Robinson ended the quarter with cash and cash equivalents of $373.6 million as against $398.6 million in the year-ago period and had no debt on its balance sheet. Cash from operations rose to $430 million at the end of the quarter from $344.8 million a year ago.

Our Analysis

We believe the company remains well positioned to benefit from its freight transportation business as evident from the strong shipments and pricing in Intermodal and Truck. Further, the cash-rich balance sheet with no debt and increasing shareholder returns make it more attractive for long-term investment. However, the company remains significantly challenged by higher operating costs, regulatory issues and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD).

Thus, we are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short-term the company holds a Zacks #4 (Sell) Rank.

 
CH ROBINSON WWD (CHRW): Free Stock Analysis Report
 
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
 
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