EXPD Expeditors International of Washington Inc

C.H. Robinson Worldwide Inc. (CHRW) has reported third quarter 2012 earnings per share of 72 cents, missing the Zacks Consensus Estimate by a penny. However, reported earnings rose 2.9% from 70 cents in the year-ago quarter.

Total revenue in the third quarter escalated 6.9% year over year to $2.88 billion but missed the Zacks Consensus Estimate of $2.98 billion.

Operating profit for the quarter rose 1.8% year over year to $187.3 million and total operating expenses increased 2.6% year over year to $245.4 million. The increase in operating expenses was mainly due to 0.7% rise in personnel expense and 8.3% in increase in other selling, general and administrative expenses.

Total operating ratio (operating expenses as a percentage of net revenue) was 56.7% in the reported quarter, reflecting a deterioration of 20 basis points (bps) from 56.5% in the year-ago quarter.

Segment Details

Transportation: The segment (comprising Truck, Intermodal, Ocean, Air and Other logistics services) reported gross profit of $382 million in the third quarter, up 2.2% from the year-ago period.

Gross profit from Truck (comprising truckload and less-than-truckload services) grew 2.1% to $327.9 million on higher truckload volume that grew approximately 8% year over year.

Gross profit from Intermodal fell 4.4% year over year to $10.1 million due to declines in net revenue margin that clouded volume growth. Net revenue margins were affected by higher capacity cost and change in business mix.

Gross profit from Ocean grew 3.5% year over year to $18.5 million based on higher pricing, offsetting volume decline.

Air transportation gross profit plunged 9% year over year to $9.0 million, primarily due to lower pricing that offset volume growth.

Gross profit from Other logistics services registered 16.6% year-over-year growth to $17.2 million on better transportation management and higher customs net revenues.

Sourcing: The segment’s gross profit increased 2.0% year over year to $33.7 million primarily on higher volumes that compensated for net revenue margin decline. Additionally, the acquisition of Timco Worldwide last year also aided the segment’s growth.

Payment Services: The segment’s gross profit (comprising income from subsidiary, T-Chek Systems Inc.) climbed 4.2% year over year to $16.1 million in the third quarter, driven by an increase in transactions.  

Liquidity

C.H. Robinson ended the quarter with cash and cash equivalents of $273 million as against $383 million in the year-ago period and had no debt on its balance sheet. Cash from operation was $267.2 million at the end of the quarter compared with $293.6 million in the year-ago period.

Our Analysis

We believe the company remains well positioned to benefit from its freight transportation business with recovery in truckload business. However, the company remains significantly challenged by higher transportation costs followed by regulatory issues and competitive threats from logistics services companies such as Expeditors International of Washington Inc. (EXPD).

We are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short term, the company holds a Zacks #3 Rank (Hold).

 
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