C.H. Robinson Keeps On Truckin'


Logistics companies seem to be tackling fuel costs with a deft hand. In spite of significantly higher fuel costs, most have come out with strong quarterly numbers. Maintaining that trend, C.H. Robinson Worldwide (NAS: CHRW) posted a 14% jump in its second-quarter bottom line.

Unfortunately, the Street was expecting much more, and shares were down by almost 8% on the news. Is that a bad signal for Robinson, and what can we expect from it now?

The numbers
Robinson's total revenues for the quarter jumped 10.3% to $2.7 billion. All modes of transportation services rose, with trucking and intermodal contributing 20.95% and 15.2%, respectively. Higher load volumes and pricing fueled the majority of growth.

The freight market has been clearly showing a recovery, evidenced by the robust performance of all industry players. Bellwether FedEx (NYS: FDX) reported a 33% jump in its latest quarter's bottom line, while profits in UPS's (NYS: UPS) latest quarter rose 26% year on year.

In spite of rising costs, particularly fuel prices, operating margins for Robinson improved to 6.7% from 6.4% last year. Higher revenues helped net income rise from $97.2 million in the year-ago quarter to $111 million.

More financials
Robinson's total cash in the bank has jumped considerably, from $215.5 million to $315.9 million year on year. Unlevered FCF has also turned around, from a negative $21.6 million to positive $10.3 million.

But what impresses me the most is zero debt on Robinson's books. Comparatively, FedEx has a debt-to-equity ratio of around 11%, while UPS's leverage stands much higher at around 147%.

The concern
CH's sourcing segment provides fresh produce to grocers and food manufacturers -- a rather unusual segment for a large logistics company. Revenues here fell 14.4% during the quarter, as business declined from its largest customer, Wal-Mart (NYS: WMT) .

Nevertheless, for the past few quarters, Robinson's total revenues have grown more than 10% year-on-year. The quarterly revenue CAGR over five years stands at 9.7%, while net income CAGR is 10.8%. Overall, the top-line situation looks fairly decent.

The fuel angle
When fuel costs rise, transportation and logistics providers can pass on the increases to customers in the form of surcharges. Companies such as FedEx and JB Hunt Transport Services (NAS: JBHT) continue to benefit from this strategy.

The American Trucking Association has predicted good times ahead for the industry. The intermodal segment is also gaining traction, with most providers doing well, and even railroads such as Norfolk Southern (NYS: NSC) focusing on the segment.

The Foolish bottom line
Although earnings missed estimates, the continued growth in the top line, combined with a clear balance sheet, arouses my interest in this company. With the industry outlook also positive, Fools may do well to keep an eye on this stock.

At the time thisarticle was published Fool contributor Neha Chamaria owns no shares of any of the companies mentioned in this article. The Motley Fool owns shares of FedEx, Wal-Mart Stores, and UPS.Motley Fool newsletter serviceshave recommended buying shares of FedEx and Wal-Mart Stores and creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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