C.H. Robinson Worldwide, Inc. (CHRW – Free Report) is benefiting from robust cost-cutting initiatives and strong liquidity. The company’s shareholder-friendly initiatives are also encouraging. However, it is grappling with the freight recession.
Factors Favoring CHRW Stock
A strong operating model and focused productivity have driven robust improvement in C.H. Robinson’s fourth-quarter 2024 performance. Despite challenges like a freight recession, the company achieved significant year-over-year gains in gross and operating margins. Its ability to decouple headcount growth from volume growth, alongside improvements in automation and AI, led to a 30% productivity boost over two years. This positions the company for continued success.
Robust cost-cutting measures are driving improvements in C.H. Robinson’s bottom line. In the fourth quarter of 2024, operating expenses declined 2% year over year to $500.8 million. Personnel expenses decreased 2.1% year over year to $354.4 million, largely driven by cost optimization efforts and productivity gains. Moreover, other selling, general and administrative expenses dropped 2% year over year, primarily due to a $12.6 million favorable adjustment related to the planned divestiture of the Europe Surface Transportation business.
The company’s commitment to its shareholders is encouraging. CHRW has consistently paid dividends for over 25 years without interruption. During the first nine months of 2024, it returned $282.8 million of cash to its shareholders, including $218.9 million in cash dividends and $63.9 million through share repurchases. In the fourth quarter of 2024, cash returned to its shareholders totaled $82.8 million, with $74.5 million in cash dividends and $8.3 million in repurchases of common stock.
Robust liquidity is another tailwind of CHRW. The company has a brief history of strong liquidity. In 2021, 2022 and 2023 its current ratio (a measure of liquidity) was pegged at 1.44, 1.08 and 1.40, respectively. The company ended 2024 with a current ratio of 1.28. A current ratio of greater than 1 is considered desirable as it indicates that the company has sufficient assets to meet its short-term obligations.
Owing to such tailwinds, CHRW’s shares have rallied 26.2% in six months against the Transportation – Services industry’s 22.3% decline.
Image Source: Zacks Investment Research
CHRW: Key Risks to Watch
C.H. Robinson is mired in significant economic challenges, including a prolonged freight recession and disruptions caused by severe weather events like the recent wildfires in Los Angeles. These factors have contributed to market growth in 2024 falling short of projections, with a constrained trucking environment due to decreased industry capacity. As a result, the market saw a 3.2% year-over-year decline in shipments.
Despite the company’s advances in dynamic pricing and digital brokerage, the logistics industry’s inherent volatility caused by seasonal market tightness, geopolitical factors and freight characteristic variations remains a challenge. The market continues to fluctuate, which requires frequent adjustments to pricing and procurement strategies, adding complexity to decision-making processes.
CHRW’s Zacks Rank
CHRW currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the Transportation sector may also consider Air Transport Services Group (ATSG – Free Report) and Expeditors International of Washington (EXPD – Free Report) .
Air Transport Services Group currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ATSG has an expected earnings growth rate of 31% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average beat of 6.1%.
Expeditors International of Washington carries a Zacks Rank of 2 at present.
The company has an encouraging track record regarding earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and met it once. The average surprise was 11.6%.
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